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NAVAL POSTGRADUATE SCHOOL
Monterey, California
ORGANIZATIONAL STRUCTURE AND OPERATION
OF CHAMPUS
by
Leland Maassen
and
David Whipple
September 1975
Approved for public release; distribution unlimited.
Prepared for:
Chief of Naval Operations
The Pentagon, Washington, D.C. 20 301
FEDDOCS
D 208.14/2:
NPS-55WP75091
NAVAL POSTGRADUATE SCHOOL
Monterey, California
Rear Admiral Isham Linder Jack R. Borsting
Superintendent Provost
Professor Whipple received research support from the
Conceptual Studies Program funded by Op-96 at NPS for this
study.
Reproduction of all or part of this report is authorized
Prepared by:
UNCLASSIFIED
SECURITY CLASSIFICATION OF THIS PAGE (When Data Entered)
REPORT DOCUMENTATION PAGE
READ INSTRUCTIONS
BEFORE COMPLETING FORM
1. REPORT NUMBER
NPS55Wp75091
2. GOVT ACCESSION NO.
3. RECIPIENT'S CATALOG NUMBER
4. TITLE (and Subtitle)
Organizational Structure and
Operation of CHAMPUS
5. TYPE OF REPORT 4 PERIOD COVERED
Technical Report
6. PERFORMING ORG. REPORT NUMBER
7. AUTHORf*.)
Leland Maassen
David Whipple
8. CONTRACT OR GRANT NUMBERfaJ
9. PERFORMING ORGANIZATION NAME AND ADDRESS
Naval Postgraduate School
Monterey, California 93940
10. PROGRAM ELEMENT, PROJECT, TASK
AREA ft WORK UNIT NUMBERS
N00018-75-WR-00018
tl. CONTROLLING OFFICE NAME AND ADDRESS
Chief of Naval Operations
The Pentagon, Washington, D.C. 20 301
12. REPORT DATE
September 1975
13. NUMBER OF PAGES
83
14. MONITORING AGENCY NAME ft ADDRESSf// different from Controlling Office)
15. SECURITY CLASS, (of thla report)
Unclassified
15«. DECLASSIFI CATION/ DOWN GRADING
SCHEDULE
16. DISTRIBUTION STATEMENT (of thla Report)
Approved for public release; distribution unlimited.
17. DISTRIBUTION STATEMENT (of the abatract entered In Block 20, It different from Report)
16. SUPPLEMENTARY NOTES
19. KEY WORDS (Continue on ravaraa aide If neceaaary and Identity by block number)
CHAMPUS
Organizational Structure
Claims Processing
UCR
20. ABSTRACT (Continue on ravaraa aide If neceaaary and Identify by block number)
This report outlines the Organizational structure and
operation of the OCHAMPUS (The Office of the Civilian Health
and Medical Program For The Uniformed Services) and offers
some evaluation of its management. Procedures used by the
several levels of management are reviewed and examined.
dd ,;
FORM
AN 73
1473 EDITION OF 1 NOV 65 IS OBSOLETE
S/N 0102-014-6601 |
UNCLASSIFIED
SECURITY CLASSIFICATION OF THIS PAGE (Whan Data Entered)
INTRODUCTION
CHAMPUS is nearing the end of its eighteenth year of
existence. In that period of time over $3,095,000,000 has
been paid to the program's several fiscal intermediaries.
Of that amount, $1,827,000,000 was expended prior to the end
of Fiscal Year 1971. The remainder, some $1,268,000,000 was
expended in the next three fiscal years. In Calendar Year
19 67, dependents of active duty and retired members and re-
tired military personnel submitted approximately 178,000
claims for hospital and professional services. By the end
of Calendar Year 1974 the total number of claims processed
for that category had risen to more than 2,814,000. By the
end of July 1974, the total number of claims processed over
the life of the CHAMPUS Program exceeded 20,727,000.
Most of the senior military and civilian officials of
the Department of Defense consider the CHAMPUS Program an
important factor in the recruiting and retention of career
members of the Armed Forces. With the advent of the "All
Volunteer Forces" concept its importance has become even
greater. On the other hand, critics of the program claim
that it is mismanaged, that people take advantage of it, and
that the program is too costly. They claim, and rightly so,
that the average sailor, soldier, or airman does not know
about the program. In addition, Congress has taken an interest
in the CHAMPUS Program. This interest, prompted by the
rapidly rising costs of health care, has placed the program
in the so-called "limelight."
In the present report the organization of the Office of
CHAMPUS is reviewed to determine the interactions of that
office with the Department of Defense, the fiscal administra-
tors, and the beneficiaries. In addition the claims processing
procedures used by major fiscal intermediaries and OCHAMPUS
are described. This compilation of facts in one place should
facilitate informed evaluation of various proposals to upgrade
or modify management controls.
THE CHAMPUS ORGANIZATION
The administrative functions of the Dependent's Medical
Care Program had been, since its inception, assigned to the
Office of The Surgeon General of the Army. In late 1971,
however, the Congress expressed its displeasure at the manner
in which the program administration was being handled. They
directed that the Office of the Secretary of Defense should
take a more active role in that function. As a result, the
Assistant Secretary of Defense (Health and Environment) was
named to direct the Dependents Medical Care Program. Although
that office became the titular head of the program, the
actual administration continued to be accomplished by an Army
Medical Officer from the Army Surgeon General's office.
The Office for the Civilian Health and Medical Program
of the Uniformed Services (OCHAMPUS) is physically located on
the grounds of the Fitzsimmons Army Medical Center, Denver,
Colorado. It is currently situated in two converted barracks-
type buildings. The OCHAMPUS staff is primarily composed of
civilian personnel although there are eighteen military offi-
cers currently assigned to duty there. A memorandum from
Deputy Secretary of Defense [Ref. 1] dated 4 December 1974
on the subject of CHAMPUS stated that these military billets,
six Army, five Navy (includes one Coast Guard officer) , and
seven Air Force, would be civilianized. It is anticipated
by the Acting Deputy Director that the civilianization will
be accomplished through normal attrition, that is, as the
military officer assigned to the position is detached, the
replacement will be a civilian.
In the same memorandum it was specifically stated that
"The Director of OCHAMPUS shall be a civilian selected by the
Assistant Secretary of Defense (Health and Environment)." The
last designated Director of OCHAMPUS departed the command in
mid-1974. Since that time an Air Force Medical Service Corps
Colonel has been Acting Director and the Acting Deputy Direc-
tor has been a Navy Medical Service Corps Captain. The civi-
lian Director of OCHAMPUS, when named, is expected to be given
a Civil Service GS-17 grade.
Prior to 1 July 197 2, the Director of OCHAMPUS reported
directly to the Surgeon General of the Army who, in turn,
reported, for CHAMPUS related matters, to the Assistant
Secretary of Defense (Health and Environment) . The present
chain of command is direct to OASD(H&E). It is direct except
that OASD has established an Office of CHAMPUS Policy to which
the Director of OCHAMPUS actually reports for most situations.
The exception to this reporting path relates to the flow of
funds. The funds used for the CHAMPUS Program previously came
from the user services, i.e., the Army, Navy, Air Force. Now
that the CHAMPUS appropriation is one of a few monitored and
controlled directly by DOD, its funds come to OCHAMPUS from
the Office of the Assistant Secretary of Defense (Administra-
tion) .
As can be seen from the OCHAMPUS Table of Organization,
Exhibit 1, the Director of OCHAMPUS has five offices which
report to him in an advisory capacity. He also has four
Directorates which carry out the operational aspects of the
CHAMPUS Program [Ref. 2]
A. OFFICE OF THE MEDICAL AND THE DENTAL ADVISOR
These offices provide advisory services on extended care
and handicapped treatment cases. They also advise the Direc-
tor on, and review performance of, Utilization and Peer Review
activities of CHAMPUS contractors. They maintain contact
through the respective professional medical and dental staffs
that the contractors maintain.
B. OFFICE OF THE LEGAL COUNSEL
The Legal Counsel examines, for legal sufficiency, all
contracts with fiscal administrators for hospital and physi-
cians' services. These examinations include all modifications,
supplementary agreements, advance payment agreements, termina-
tion notices and all related contracting and procurement
documentation. He also insures compliance with all applicable
provisions of law, the Armed Services Procurement Regulations,
and all procurement directives of higher authority. He ad-
vises the Director on all legal questions involving interpre-
tations and monitors cases involving suspicion of fraud. He
represents the Director in all legal matters requiring coordi-
nation with other federal agencies.
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C. OFFICE FOR PROGRAM ANALYSIS
This office is the primary study group for the CHAMPUS
Program. It is tasked with ongoing investigations of poli-
cies and procedures of the program with an objective of pro-
viding optimum service to the program beneficiaries at the
minimum cost to the government.
D. OFFICE OF ADMINISTRATIVE SERVICE
This office provides logistic and administrative support
for OCHAMPUS staff entities. The General Services Branch
provides mail and messenger services and processes all in-
coming and outgoing correspondence. This branch also oper-
ates the records management program, carries out the supply
functions for the command, and arranges for the maintenance
of equipment and the OCHAMPUS buildings. The Reproduction
and Housekeeping Branch provides all of the reproduction
services to the command and obtains the necessary janitorial
services for the OCHAMPUS buildings. The Stenographic Branch
provides stenographic and clerical services to the command.
They have recently installed a word processing system which
involves a telephonic-call-in dictation machine. The tapes
from these machines are transcribed by typists on magnetic
cards which are then used to prepare smooth originals. This
system allows the on-site inspectors to phone in their re-
ports from a hotel room while the information is fresh on
their mind. By the time they arrive back at OCHAMPUS, the
finished report is on their desk ready for their signature.
E. DIRECTORATE OF HEALTH SERVICES
This Directorate is primarily concerned with the benefits
available under the Program for the Handicapped. The Handi-
capped Services and Hospitalization Review Division acts on
claims and requests for benefits for patients with moderate
and severe mental retardation and for patients with serious
physical handicaps, other than those of a dental nature. It
reviews and approves or disapproves applications for extended
hospitalization in excess of 90 days. Such cases involve
patients with a diagnosis of some type of chronic condition,
or a nervous, mental, or emotional disorder which falls under
the provisions of the Basic CHAMPUS Program.
The Health Resources Information Division maintains a
registry of information, including location, cost, and ser-
vices provided for the use of handicapped children and other
persons requiring specialized care. Sponsors, upon request,
can obtain information on specialized care facilities for a
given area which can provide the specific care required for
an eligible dependent. This division also conducts on-site
evaluations of the specialized care institutions to investi-
gate complaints, to ascertain the quality and appropriateness
of care, to ascertain the adequacy of staff and plant, and to
insure compliance with pertinent lawas and accreditation stan-
dards.
8
F. DIRECTORATE OF MANAGEMENT SERVICES
The Management Services Directorate acts as a Management
Information Systems Office and provides management information
on a timely basis to all managerial elements of the OCHAMPUS
staff. The Statistics Division provides statistical analy-
sis of available data and recommends reporting formats for
planning and reporting purposes. This division also makes
recommendations concerning the inclusion of those items of
data considered as essential for the OCHAMPUS data base. The
Data Automation Division, through its Systems Design Branch,
designs data automation systems and writes and maintains all of
the OCHAMPUS computer programs. The Design Branch also per-
forms feasibility-of-automation studies for various OCHAMPUS
elements. The Computer Operations Branch operates the IBM
3 60/3 0 computer and peripheral equipment. It provides key-
punch support, maintains input and output controls, and man-
ages the computer tape library. This last function entails
the inventory control of approximately 1,4 00 reels of taped
programs and data.
G. DIRECTORATE OF LIAISON ACTIVITIES
This Directorate is charged with the development of an
ongoing program of providing up-to-date CHAMPUS Program in-
formation to beneficiaries, to providers, to fiscal adminis-
trators, to hospital contractors, and to the several uniformed
services. It also investigates and responds to complaints,
inquiries, and requests for assistance. The Service Liaison
Representatives, a division of this Directorate, maintain
liaison between OCHAMPUS and their respective services. They
represent their service's interest to OCHAMPUS and advise and
assist CHAMPUS Advisors and Health Care Counselors. They al-
so provide assistance to other elements of the OCHAMPUS staff
in handling inquiries, complaints, and requests. These re-
presentatives prepare special studies for their respective
services when required or directed to do so.
The Inquiries Division's primary function is to investi-
gate and respond to complaints and requests for information
received from all sources. Another one of their functions
is to submit requests to the services for eligibility deter-
minations in questionable cases and to provide to fiscal
administrators and sources of care all information concerning
terminations of eligibility. The Public Affairs Division, in
cooperation with the DOD information agencies, develops and
manages a CHAMPUS information program. This program provides
information on CHAMPUS benefits and eligibility requirements
to all interested persons. They also recommend and coordinate
public appearances by OCHAMPUS staff members and prepare or
assist in the preparation of the member's speeches. They
provide clearance for all other speeches and articles prepared
by staff members and coordinate the presentation of CHAMPUS
exhibits at national and local conventions.
10
H. DIRECTORATE OF CONTRACT MANAGEMENT
The Contract Management Directorate is responsible for
all matters pertaining to contracts, except for legal matters.
The Director of Contract Management exercises authority as the
OCHAMPUS Contracting Officer for the United States Government.
The Contract Administration Division has as its primary re-
sponsibility the administration of contracts, the development
of workload data, budget estimates, and the representation of
OCHAMPUS on all financial matters. They conduct on-site re-
views of contractor operations. In this function they are
primarily concerned with the adherence to established policy
and the adequacy of service. They also monitor contractor
operations through reviews of monthly claims activity reports.
The Contract Operations Division maintains liaison with
the contractors, advises them on matters of policy and pro-
cedure, and performs monthly audits on selective samples of
claims paid to determine accuracy of the contractor's claims
processing procedures. This last function is accomplished
with the assistance of the OCHAMPUS computer which generates,
randomly, a series of claims numbers. The contractor is noti-
fied of these numbers and is requested to send the hard-copy
claims to OCHAMPUS for review. This division also verifies
contractor invoices prior to payment. They also maintain
liaison with several associations and agencies which are in-
volved in prepayment drug plans and perform administrative,
consultative, and advisory work in the administration of the
CHAMPUS drug program.
11
The Finance and Accounting Division certifies disburse-
ment vouchers, controls all funds, maintains journals and
ledgers, and prepares the financial reports. The actual
operations of this division will be discussed more fully in
a later section.
12
CLAIMS PROCESSING - FISCAL ADMINISTRATORS
A beneficiary's first contact with the CHAMPUS system
occurs when they present themselves for treatment to a parti-
cipating, qualified provider. The beneficiary presents the
provider with a copy of DD Form 1251, Statement of Non-
Availability, issued by the local military medical facility
if they are seeking inpatient care [Ref. 3]. in return, the
provider, depending on the type of care being provided, has
the beneficiary complete applicable portions of one of the
following forms:
a. DA 1863-1, Request for CHAMPUS Payment - Hospitals
(Exhibit 2) .
b. DA 18 63-2, Request for CHAMPUS Payment - Other Than
Hospitals (Exhibit 3) .
c. DA 1863-3, Request for CHAMPUS Payment - Program for
the Handicapped (Exhibit 4) .
d. DA 1863-4, Request for CHAMPUS Payment - Pharmacies
(Exhibit 5) .
The beneficiary is responsible for the completion of items
one through thirteen on these forms. Items one through six
pertain to patient identification data including identifica-
tion card number and the effective beginning and ending dates
for eligibility. Items seven through twelve pertain to the
identification and duty station of the service member. Item
thirteen is the certification that the preceding items are
13
EXHIBIT 2-A
SERVICES AND/ OR SUPPLIES PROVIDED BY CIVILIAN HOSPITALS
CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED SERVICES (CHAMPUS)
SEE
INSTRUCTIONS
ON REVERSE
gjg; SECTION I (To be completed by patient or other reaponalble lamllv member- Please print or type)
PATIENT DATA
SERVICE MEMBER DATA
name OF SPONSOR (Imet, ftrmt, middle initial)
I NAME (lest, firet, middle initial)
2. DATE OF BIRTH
3 ADDRESS (Include Zip Code)
a SERVICE NUMBER OR SOCIAL SECURITY NUMBER
(at applicable)
9. GRADE
10. ORGANIZATION AND DUTY station (Home Port lor Ship*) (Addreaa for Retired)
« patient is a (Check one)
□ "I SPOUSE CH'21 DAUGHTER □'31 SON □ 141 RETIREE
S identification caro (DD Form 1173. DD Form 2 or PHS Form 1866-3)
EFFECTIVE DATE
EXPIRATION OATE
11 SPONSOR'S OR RETIREE'S BRANCH OF SERVICE
| |lD USA CU<2) USAF Dial USMC □ 1*1 USN
f~llS) USCG □'*' USPHS □"> ESSA
6 BASIS FOR CARE - ACTIVE OUTY DEPENDENTS ONLY (Check One)
□ ... RESIOING APART , 1 RESIOING WITH SPONSOR i . OUTPATIENT
1,1 FROM SPONSOR LJ»*' DD FORM 12B1 ATTACHED l—H3' OUTPATIENT
[ | U) OTHER (Spicily)
12 STATUS
I I ID ACTIVE OUTY 0<2) RETIRED D ,3t DECEASED
13 CERTIFICATION
I certify to the best of my knowledge and belief the above information in Section I is correct. To the extent that I have authority
to do so I hereby authorize the release of medical records in this case to both the contractor and the Government.
If a RETIRED MEMBER or dependent of a retired or deceased member, I certify that to the best of ray knowledge and belief, that
(Check appropriate box) (Delete portion in parenthesis not applicable)
. . (I am not) (the patient is not) enrolled (neither is sponsor) in any other insurance, medical service, or health plan provided by
I — ' law or through employment.
I — i (1 am) (the patient is) enrolled (so is sponsor) in another insurance , medical service, or health plan provided by law or
1 — ' through employment, however the particular benefits claimed on this form are not payable under the other plan.
Name (print or type) (Relationship to Patient)
Signature
*r SECTION II (To be completed by Source of Care)
i« name and ADDRESS OF hospital (Include Zip Code)
15. CIVILIAN SOURCE
LOCATION CODE
6. THIS STATEMENT CONSTITUTES
□ 111 A COMPLETE BILLING
OR PARTIAL BILLING (Check appropriate box)
| | 12) INITIAL □ (3) INTERIM Q <«1 FINAL
STATEMENT STATEMENT STATEMENT
21 NAME OF ATTENDING OR AOMITTING PHYSICIAN OR DENTIST
7. HOSPITAL SERVICES
I I M) INPATIENT
1 ] (2) OUTPATIENT
18. DISPOSITION OF PATIENT
Q (1) REMAINING QlZI DISCHARGED □ I 31 DECEASED
19. INCLUSIVE DATES OF CARE
""WTH DAI YEAR
MONTH DAI
20 HOSPITAL DAYS
THIS STATEMENT
22 diagnosis (Vae standard nomenclature)
□ (I) MENTAL Ol2) CHRONIC
26 PROCEDURES (List by dale, surgical operation per(ormed)
33 CERTIFICATION OF SPECIAL CIRCUMSTANCES BY ATTENDING PHYSICIAN OR
OENTlST
I certify that (Complete appropriate apace(a) )
B- Q Services were necessary (or treatment of a bonafide medical
emergency
b Days PRIVATE ROOM care billed on thte claim were required
for proper care and treatment of the patient.
c Days / hours PRIVATE DUTY NURSING CARE billed on this
claim were required for proper care and treatment of the
patient
d- Q Other (Specify)
RELATED AUTHORIZED ADMISSIONS
DATE ADMITTED TO
HOSPITAL
DATE DISCHARGED FROM
HOSPITAL
DEDUCTIONS APPLIED
AUTHORIZED SERVICES
a. ROOM PRIVATE
h. (Avg ■ Semi • Private Rate)
c. ROOM, S-PRIVATE (2, 3, 4 Beds)
d. ROOM WARD
e. ROOM NURSERY
I. OPERATING ROOM
CHARGES
OATE AND SIGNATURE OF ATTENDING PHYSICIAN OR OENTlST
(Only when an entry made in (his Item 33)
6- DELIVERY ROOM
h. ANESTHESIA SERVICES (By hospital employee)
3S CERTIFICATION OF SOURCE OF CARE
I certify thai
(1) This statement is for services furnished the patient as authorized
by the attending physician or dentist.
(2) The amounts claimed in Item 28 are true and correct and do not
exceed those charged the general public for like services
(3) Except for the amount shown in [tern 30 payment for these services
has not been received.
(4) Except for the amount shown' in Iterr. 30 no claim (or payment for
services included in the statement and authorized under the Civilian
Health and Medical Program of the Uniformed Services will be made
upon the patient or sponsor
LABORATORY SERVICES
;. X-RAY SERVICES
k. DRESSING AND CAST SERVICES
I. DRUGS AND MEDICATION SERVICES
m. OTHER SERVICES (Specify)
29 TOTAL CHARGES THIS STATEMENT FOR CARE AUTHORIZED
30. (PAID BY) OR IOUE FROM) PATIENT (Cross out one)
31 OUE FROM GOVERNMENT
32. VARIANCE (ITEM 29 LESS 30 AND 31
The persons signing this form ore advised that the
renders them liable to prosecution under applicabl
IHul making of a talse or fraudulent
e Federal Laws.
tatement he
_ , FORM
DA i June? 1863-2
(Civilian Hospitals)
REPL ACES OA FORM 1863-1 I SEP 61
WHICH IS OBSOLETE.
Form Approved
Comptroller General. U. S. , 22 Sep 67
14
EXHIBIT 2-B
SPECIAL INSTRUCTIONS
(Please check form for completeness to eliminate delay in processing)
The sponsor, patient or responsible family member will be required to complete Items 1 through 13 of this claim form, and the Source
of Care will complete the remainder of the form. The completed claim will then be forwarded to the appropriate fiscal administrator for
processing.
SECTION I
INSTRUCTIONS FOR COMPLETION OF ITEMS BY PATIENT
ITEM 22. DIAGNOSIS. Use standard nomenclature.
applicable block if diagnosis is mental or chronic.
Also, check
ITEM 5. IDENTIFICATION CARD. If the DD Form 1173 is
used, the Effective Date is located on the reverse side of the
card in block 15 b. The Expiration Date is located on the front
side of the card in block 3.
ITEMS 23, 24 and 25. Contractor use only.
ITEM 26. PROCEDURES Enter all surgical operations performed.
If DD Form 2(Ret) or PHS Form 1866-3(Ret) is used, the Ef-
fective Date is located on the reverse side of the card in block
entitled DATE OF ISSUE. The Expiration Date is located on
the front of the card in the block entitled EXPIRATION DATE.
ITEM 27. RELATED AUTHORIZED ADMISSIONS Enter admis-
sion and discharge dates for all periods of hospitalization during
period of care (Item 19) covered by this statement.
ITEM 6. BASIS FOR CARE-ACTIVE DUTY DEPENDENTS ONLY
OUTPATIENT CARE -Spouses and children of active duty per-
sonnel may elect to obtain OUTPATIENT care from either civil-
ian or uniformed services facilities. (Prenatal and postnatal care
are considered part of maternity care.)
INPATIENT CARE -Spouses and children of active duty per-
sonnel who reside APART from their sponsor may obtain INPA-
TIENT care from either civilian or uniformed services facilities.
Spouses and children of active duty personnel who reside WITH
their sponsor must obtain INPATIENT care including MATER-
NITY care from uniformed services medical facilities unless the
care is provided under emergency conditions or on a trip. If these
exceptions do not apply, care from civilian sources at Government
expense may be obtained within the United States & Puerto Rico
ONLY if a Nonavailability Statement (DD Form 1251), indicating
that the required care is not available from a uniformed services
medical facility located within a reasonable distance of the pa-
tient's residence, is attached to this claim.
DEPENDENT PARENTS AND PARENTS-IN-LAW are NOT au-
thorized civilian medical care at Government expense under any
circumstances.
ITEM 8. SERVICE NUMBER OR SOCIAL SECURITY NUMBER.
The sponsor's service number or social security number is loca-
ted in block 12 of the dependent's DD Form 1173.
ITEM 10. ORGANIZATION AND DUTY STATION. Active duty
dependents enter the present duty assignment of sponsor. Re-
tired and dependents of retired enter residence of Retiree. De-
pendents of deceased leave blank.
ITEM 13. CERTIFICATION
If an authorization in addition to that contained in the execu-
ted certificate in Item 13 is considered necessary for the release
of medical records pertinent to the care furnished, then the source
of civilian medical care should obtain the same.
The Law (10 U.S.C. 1086(d)) provides that no benefits under
this program may be provided to a retired person or the dependent
of a retired or deceased member enrolled in any other insurance,
medical service or health plan provided by law or through employ-
ment unless that person certifies that the particular benefit he is
claiming is not payable under the other plan.
The certificate will be signed by the retiree, dependent receiv-
ing tare when 18 years of age or over, sponsor or other responsi-
ble family member
SECTION II
INSTRUCTIONS FOR COMPLETION OF ITEMS
BY SOURCE OF CARE
ITEM 15. Contractor use only.
ITEM 16 STATEMENT. Check applicable block to reflect ap-
propriate type of statement being submitted.
ITEM 28. AUTHORIZED SERVICES. Enter only information rel-
ative to type of service or services authorized under the Civilian
Health and Medical Program of the Uniformed Services for which
this statement is being submitted.
ITEM 29. TOTAL CHARGES. Enter total of the authorized ser-
vices furnished, as shown in Item 28.
ITEM 30. PAID BY OR DUE FROM PATIENT. (Enter patieat'e
liability.)
a. Dependents of active duty personnel.
(1) INPATIENT CARE - The first $25.00 of the hospital
charges or $1.75 per day, whichever amount is greater. No charge
for services of professional personnel.
(2) OUTPATIENT CARE - For authorized outpatient car©
claimed during a fiscal year (1 July through 30 June) for only one
family member, the patient (or sponsor) must pay the first $50.00
of the charges. If benefits are claimed for two or more members
of a family group, the patient (or sponsor) must pay the first $100
of the charges. After the deductible has been met, the patient
will pay 20% of all charges incurred for authorized outpatient care
for the remainder ol the fiscal year.
b. Retired personnel and their dependents and dependents of
deceased personnel.
(1) INPATIENT CARE - 25% of hospital charges and fees
of professional personnel.
(2) OUTPATIENT CARE - The patient or family group will
be required to pay the same deductible as is applicable to depend-
ents of active duty personnel. Thereafter, the patient or family
group will be required topay 25% of any expenses incurred tor au-
thorized outpatient care for the remainder of the fiscal year.
ITEM 31. DUE FROM GOVERNMENT Hospitals will enter the
amount due from theGovernment taking into consideration the rate
agreements with contractors when such agreements exist.
ITEM 32. VARIANCE. MUST be completed for those hospital*
which have rate agreements with contractors.
ITEM 33. CERTIFICATION OF SPECIAL CIRCUMSTANCES.
Enter figures required, or check blocks as appropriate for tho
patient being treated. To be payable, claims covering author-
ized care furnished to a hospitalized inpatient in a medical facility
which docs not meet the definition of "Hospital" under the Pro-
gram must show that treatment was a bonafide medical emergency
by checking the block, Emergency. The block, Other. Specify,
will be utilized, with a short specific statement included, when
an additional certification not listed is required. The attending
physician or dentist must sign the certificate prior to submission
of the claim for payment.
ITEM 34. CERTIFICATION OF SOURCE OF CARE.
This certificate must be signed prior to submission of claim
for payment.
15
EXHIBIT 3-A
SERVICES AND/OR SUPPLIES PROVIDED BY CIVILIAN SOURCES
(EXCEPT HOSPITALS)
CIVILIAN HEALTH AND MEDICAL PROOIAM OF THE UNIFOIMEO SERVICES (CHAMPUS)
SECTION I (To be completed by patient or other responsible {amity member. Please print or type)
SEE
INSTRUCTIONS
ON IEVEISE
PATIENT DATA
SERVICE MEMBER DATA
I . NAME (toil, /int. middle initial)
2. DATE OF SIRTH
7. NAME OF SPONSOR (last, first, middle initial)
3. ADDRESS (Include Zip Code)
Bi SERVICE NUMBER
b SOCIAL SECURITY ACCOUNT
NUMBER
9. GRADE
IO. ORGANIZATION AND DUTY STATION (Home Port for Snipe) (Addreee (or Retired)
4. PATIENT IS A /Check one)
□ (I (SPOUSE dlZ) DAUGHTER 0(3 1 SON □(4) RETIREE
9. IDENTIFICATION CARD
CARD NO.
(DD Form 1173. DD Form 2 or PHS Form 1866—3)
MONTH DAY YEAR
EFFECTIVE DATE
EXPIRATION DATE
I 1. SPONSOR'S OR RETIREE'S BRANCH OF SERVICE
□ < I > USA □ ( 2 ) USAF □ ( 3 ) USMC Dui USN
□ ( 5 ) USCG O < 6 > USPHS □ < 7 > ESSA
6 BASIS FOR CARE • ACTIVE DUTY DEPENDENTS ONLY
(Check one)
□ , . RESIDING APART i — 1,_ . RESIDING WITH SPONSOR | — i, . „,,__-_,_„,
( ' > FROM SPONSOR D'2,DO FORM 1291 ATTACH ED a < » >OUTPAT.ENt|
D( 4 > OTHER (Specify)
12. STATUS
□ ( I ) ACTIVE DUTY □ ( 2) RETIRED CZ)( 3 I DECEASED
13. CERTIFICATION
I certify to the best of my knowledge and belief the above Information In Section 1 la correct To the extent that I have authority
to do to I hereby authorize the release of medical records In this case to both the contractor and the Government
If a RETIRED MEMBER or dependent of a retired or deceased member, 1 certify that to the best of my knowledge and belief, that
(Check appropriate box) (Delete portion in parenthesis not applicable)
I — | (I am not) (the patient Is not) enrolled (neither Is sponsor) in any other Insurance, medical service, or health plan provided by
law or through employment
I — | (I am) (the patient Is) enrolled (so Is sponsor) In another Insurance, medical service, or health plan provided by law or
through employment; however the particular benefits claimed on this form are not payable under the other plan.
Name (print or type)
(Relationship to Pollen!)
Signature
t 4. NAME AND ADDRESS OF SOURCE OF CARE (Include llf Coat)
I S. NAME ANO TITLE OF INDIVIDUAL ORDERING CARE
a SOURCE OF CARE LOCATION
CODE
b PROVIDER OF SERVICES
□ ( I ) ATTENDING PHYSICIAN
O ( 2 ) OTHER (Specify)
PATIENT STATUS
□ t I ) INPATIENT
□ ( 2 ) OUTPATIENT
YEAR
MONTH
7. DIAGNOSIS (Uie standard nomenclature)
(Check when applicable) I 1 service* were necessary for treatment of a bonafide medical emergency
I B. RELATED HOSPITALIZATION (If applicable)
FROM
a. INTL STAT CODE
'
' b 12-
' "■■
WKm
■
ENTER ESTIMATED OR ACTUAL DATE OF DELIVERY IN MATERNITY CASES. LIST BY DATE SURGICAL OPERATIONS AND/OR CARE FURNISHED
INCLUDING VISITS FOR WHICH SEPARATE CHARGES ARE CLAIMED (Type or print) (Attach additional sheets if required)
DATEIS) OF SERVICE
a. ITEM OR DESCRIPTION OF SERVICE
c PROCEDURE CODE
d TOTAL CHARGES THIS STATEMENT FOR CARE AUTHORIZED
e (PAID BY) OR ( DUE FROM ) PATIENT (Cross out one)
I- DUE FROM GOVERNMENT TO SOURCE OF CARE
DUE PATIENT OR SPONSOR, REIMBURSEMENT
20. CERTIFICATION BY SOURCE OF CARE
1 certify that the services and / or supplies listed hereon were performed or authorized by the attending physician, dentist or other
professional personnel In charge, that payment due from the Government has not been received, and that, except for the amount payable
by the patient In accordance with the terms of the Civilian Health and Medical Program of the Uniformed Services, the amount paid by
the Government will be accepted as payment In full for the authorized services and / or supplies listed hereon.
I further certify that lam notanlntern, resident or otherwise In training status for which I am receiving compensation for services
listed on this claim.
Name (print or type)
Title
Date
Signature
The persons signing this form are advised that the willful making of a false or fraudulent statement herein
renders them liable to prosecution under applicable Federal Laws.
(Civilian Sources)
REPLACES DA FORM 1S63-2. 1 SEP 61.
WHICH IS OBSOLETE.
Form Approved
Comptroller General, U. S, 22 Sep 67
16
EXHIBIT 3-B
SPECIAL INSTRUCTIONS
(please check form for completeness to eliminate delay In processing)
This form will be used by all civilian sources of care other than hospitals, pharmaceutical services In the United States and Puerto
Rico, and sources providing care under the Handicapped Program.
The sponsor, patient or responsible family member will be required to complete Items 1 through 13 of this claim form, and the
source of care will complete the remainder of the form. The completed claim will then be forwarded lo the appropriate fiscal admin-
istrator for processing.
SECTION I
INSTRUCTIONS FOR COMPLETION OF ITEMS BY PATIENT
ITEM 5. IDENTIFICATION CARD. If the DD Form 1173
la used, the Effective Date is located on the reverse side of the card
In block 15b The Expiration Date Is located on the front side
of the card In block 3.
If DD Form 2<Ret) or PHS Form 1866-3(Ret) Is used, the Ef-
fective Date is located on the reverse side of the card in block entitled
DATE OF ISSUE. The Expiration Date is located on the front
of the card In the block entitled EXPIRATION DATE.
SECTION II
INSTRUCTIONS FOR COMPLETION OF ITEMS
BY SOURCE OF CARE
(Shaded area* are for CONTRACTOR USE ONLY)
ITEM 15. NAME & TITLE OF INDIVIDUAL ORDERING CARE.
Individual ordering care must be the attending physician, dentist
Or other professional person In charge.
ITEM 17. DIAGNOSIS. EMERCENCY-Thls block will be
checked only when a bonaflde medical emergency exists.
ITEM 6. BASIS FOR CARE-ACTIVE DUTY DEPENDENTSCNLY
OUTPATIENT CARE-Spouses and children of active duty per-
sonnel may elect to obtain OUTPATIENT care from either civil-
ian or uniformed services facilities, (prenatal and postnatal care
are considered part of maternity care.)
INPATIENT CARE-Spouses and children of active duty per-
sonnel who reside APART from their sponsor may obtain INPA*
TIENT care from either civilian or uniformed services facilities.
Spouses and children of active duty personnel who reside WITH
their sponsor must obtain INPATIENT care Including MATER-
NITY care from uniformed services medical facilities unless the
care is provided under emergency conditions or on a trip If these
exceptions do not apply, care from civilian sources at Government
expense may be obtained within the United States & Puerto Rico
ONLY if a Nonavailability Statement (DD Form 1251), indicating
that the required care Is not available from a uniformed services
medical facility located within a reasonable distance of the patient's
residence, is attached to this claim.
DEPENDENT PARENTS AND PARENTS-IN-LAW are NOT
authorized civilian medical care at Government expense under any
circumstances.
ITEM 8a. SERVICE NUMBER, h. SOCIAL SECURITY
ACCOUNT NUMBER Enter the sponsor's service number
(located m block 12 of the dependents DD Form 1173),
and sponsor's social security account number.
ITEM 18. RELATED HOSPITALIZATION,
dates of related hospitalization If applicable.
Enter the Inclusive
ITEM 19a, b and c Enter only those services and /or supplies
which are authorized for payment under CHAMPUS All services
and supplies should be itemized to Insure prompt and proper pay-
ment. Payment by the Government to the source of services and
supplies Is based normally upon usual, customary, and reasonable
charges. However, should a physician, dentist, or other profes-
sional person expend unusual effort for proper care of the patient,
he should submit a clinical summary with bis claim In support of
a request for special consideration of the amount payable for his
services.
d. Enter total of the authorized charges in Column 19b.
€. Enter the patient's liability.
(1 ) Dependents of active duty personneL
(a) Outpatient Care. For authorized outpatient care
claimed during a fiscal year (1 July through 30 June) for only one
family member, the patient (or sponsor) shall be required to pay
the first $60.00 of the charges. If benefits are claimed for two
or more members of a family group, the patient (or sponsor) must
pay the first $100.00 of the charges. After the deductible has
been met, the patient (or sponsor) will pay 20% of all charges In-
curred for authorized outpatient care for the remainder of the fis-
cal year. The Government's share of the cost of benefits after
the deductible has been met will be 80* .
ITEM 10. ORGANIZATION AND DUTY STATION Active duty
dependents enter the present assignment of sponsor Retired
and dependents of retired enter residence of Retiree. Dependents
of deceased leave blank.
ITEM 13. CERTIFICATION
If an authorization In addition to that contained In the execu-
ted certificate In Item 13 Is considered necessary for the release
of medical records pertinent to the care furnished, then the source
of civilian medical care should obtain the same.
The Law (10 U.S.C. 1086(d)) provides that no benefits under
this program may be provided to a retired person or the dependent
of a retired or deceased member enrolled In any other Insurance,
medical service or health plan provided by law or through employ*
ment unless that person certifies that the particular benefit he Is
claiming Is not payable under the other plan.
The certificate will be signed by the retiree, dependent receiv-
ing care when 18 years of age or over, sponsor or other responsi-
ble family member.
(b) Inpatient Care.
No charge for professional services.
(2) Retired personnel and their dependents and the depend-
ents of deceased personnel.
(a) Outpatient Care. The patient or family group will be
required to pay the same deductible as Is applicable to depend-
ents of active duty personnel. Thereafter the patient or family
group will be required to pay 25% of any expenses Incurred for au-
thorized outpatient care for the remainder of the fiscal year. The
Government's share of the cost of benefits provided after the de-
ductible has been met will be 75%.
(b) Inpatient Care. The patient (or sponsor) shall be re-
quired to pay 25% of the fees of professional personnel for auth-
orized Inpatient care. The Government's share of the cost will
be 75% of the total charge for authorized Inpatient care.
ITEM 20. CERTIFICATION BY SOURCE OF CARE. The Pro-
gram operates under the full payment concept which means that,
except for the amount payable by the patient, the amount paid by
the Government to the source of services and /or supplies shall
constitute payment In full for the authorized care, and no further
amount will then be due from any source for those same services
or supplies. Therefore, It Is necessary that the cert iflcation In
Item 20 be completed without alteration. In the event this Is not
done, payment from public funds to the source of care will not be
made.
17
EXHIBIT 4-A
SEE
INSTRUCTIONS
ON IEVEISE
SERVICES AND/OR SUPPLIES ■ HANDICAPPED PROGRAM
(ACTIVE DUTY DEPENDENTS ONLY)
CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED SERVICES (CHAMPUS,
For uii of rhli form, too AR 40*121; tho proponent agency is Offieoof Tho Surgoon Ganorol.
CASE NUMBER
lintON I i In in complmud by pmtianl or olkar raspotutbla family mambar PUaim pnrti or typa)
PATIENT DATA
SERVICE MEMBER DATA
I NAME iimji finl, mtddUt tmttmlt
1 DATE OF BIRTH
6 NAME OF SPONSOR limit, first, mutdla imilimJl
3 ADDRESS llnchtda Zip Codml
7a SERVICE NUMBER
6 PAY CRAOE
9 ORGANIZATION AND OUTV STATION (Horn* Port for Smiptl
4 PATIENT IS A (Ckmck onml
[71 01 SPOUSE □ (3) DAUGHTER
D<3> SON
IDENTIFICATION CARD
CARD NO
{DDForm 1173)
EFFECTIVE DATE
EXPIRATION DATE
10 5PONSOR S BRANCH OF SERVICE
□ d) USA D(2) USAF □(3JUSMC □ (4) USN
□ (5) USCG □ (*> USPHS □ <7) ESSA
II CERTIFICATION
I certify to the best of my knowledge and belief the above information in Section I is correct. The handicapped case nas been
accepted by OCIIAMPUS or appropriate overseas commander. To the extent that I have authority to do so I herehy authorize the release of
medical records in this case to both the contractor and the Government
Name (print or type)
Relationship to Patient
Signature
SfCTION II (To br tampUUd by Souret of Cart!
i NAME AND AODBESS OF SOURCE OF CARE tlnctuda Zip Coda
SOURCE OF CARE
LOCATION CODE
c TYPE OF CARE
["")(' 1 HOSPITAL
□ (I) INSTITUTION
□ <3) OUTPATIENT
b TYPE OF FACILITY
□ (I) PUBLIC OR STATE
[~] (?) PRIVATE NON PROFIT
□ (3) PRIVATE PROFIT
13 NAME AND TITLE OF INDIVIDUAL ORDERING CARE
4 DIAGNOSIS I Lka standard nomanclaf urn
o 13 BREAK CODE
b INTl 5TAT CODE
INCLUSIVE DATE OF CARE
FROM
OATES OF SERVICE
o ITEM OR DESCRIPTION OF SERVICE
PROCEDURE CODE
d TOTAL CHARGES THIS STATEMENT FOR CARE AUTHORIZED
• (PAID BY) OR (DUE FROM) PATIENT (Cross out om
f DUE FROM GOVERNMENT TO SOURCE OF CARE
g DUE PATIENT OR SPONSOR, REIMBURSEMENT
16 CERTIFICATION BY SOURCE OF CARE
I certify thai the services and/or supplies listed hereon were performed or authorized by the attending physican, dentist or other
professional personnel in charge, that payment due from the Government has not been received, and that, except for the amount payable
by the patient in accordance with the terms of the Civilian Health and Medical Program of the Uniformed Services, the amount paid by the
Government will be accepted as payment in full for the authorized services and /or supplies listed hereon.
I further certify that I am not an intern, resident or otherwise in training status for which 1 am receiving compensation for services listed
on this claim.
Name (print or type)
Title
Date
Signature
TSr pmnont tigiung this form art mdvimd that tUr willful mmkima of % falsa or frmuduUtnt stmUm
rmnmUtn tharn liabla to promaculiom ummmr appluabia FadsrmJ Laws.
}?, fISCAl ADMINISTRATOR USE ONLY
DA ro** 1863-3
"** I JUN *7 ,ww'* *
(Handicoppod)
Form Approved
Comptroller Gonoral U S 32 Sop 6?
18
EXHIBIT 4-B
SPECIAL INSTRUCTIONS
(Please check form for completeness to eliminate delay in ;
This form is for submission of claims by all sources of service and/or supplies, which pertain ONLY to the Handicapped portion of
the Civilian Health and Medical Program of the Uniformed Services.
No benefits are payable under the Handicapped Program unless the Executive Director, OCHAMPUS, or appropriate oversea comman-
der has accepted the dependent for benefits under the program and approved a plan for management of the handicapping condition. At the
time of acceptance of the dependent in the program and approval of benefits, a case number is assigned and claim forms provided the spon-
sor or other responsible family member who must complete Items 1 through 11, The source of care will complete the remainder of the form.
The completed claim form will then be forwarded to the appropriate fiscal administrator for processing.
SECTION I
INSTRUCTIONS FOR COMPLETION OF ITEMS BY SPONSOR
OR OTHER RESPONSIBLE FAMILY MEMBER
ITEM 5. IDENTIFICATION CARD. The EFFECTIVE DATE is
located on the reverse side of DD Form 1173 in block 15 b. The
EXPIRATION DATE is located on the front side of DD Form 1173
in block 3.
ITEM 7a SERVICE NUMBER 7b. SOCIAL SECURITY ACCOUNT
NUMBER Enter sponsor's service number {located in block 12 of
Dependents DD Form 1173) in 7a and sponsor's social security
account number in 7b.
ITEM 8. PAY GRADE Enter appropriate pay grade, E-l, W-l,
0-1, etc. (See chart below)
ITEM 9. ORGANIZATION AND DUTY STATION. Enter the
present duty assignment of sponsor.
ITEM 11. CERTIFICATION
This certificate MUST be signed prior to submission of the
claim for payment. It will be signed by the dependent receiving
care when 18 years of age or over, by the sponsor, or other re-
sponsible family member. If an authorization, in addition to
that contained in the executed certificate in Item 11, is consid-
ered necessary for the release of medical records pertinent to the
care furnished to the dependent, then the source of civilian medi-
cal care should obtain the same.
SECTION II
INSTRUCTIONS FOR COMPLETION OF ITEMS
BY SOURCE OF CARE
ITEM 12c. TYPE OF CARE Hospital-for any service or supply
provided while in an inpatient status (patient entered on the roll
of the hospital as an inpatient.)
Institution-care provided in private nonprofit, public or state
institutions and facilities. Normally, this is residential care.
Outpatient-services provided on a visit basis in the home,
hospital, clinic, institution, agency or office by professional
persons.
ITEM 13. NAME & TITLE OF INDIVIDUAL ORDERING CARE
Individual ordering care must be the attending physician, dentist,
or other professional person in charge.
ITEM 14 DIAGNOSIS. Only moderately or severely mentally re-
tarded and seriously physically handicapped spouses and children
of ACTIVE DUTY members may receive care under the handicap-
ped portion of the CHAMPUS. Therefore, the diagnosis of these
patients must reflect the degree of impairment. Further, original
diagnosis of such conditions must be made by a physician.
c. Inclusive dates of care covered by this claim.
ITEM 15 a, b, and c. Enter onlv those services and or supplies
which are authorized for payment under the CHAMPUS. All ser-
vices and/or supplies should be itemized to insure prompt and
proper payment.
d. Enter total of the authorized charges in column 15b.
e. Enter the patient's (Sponsor's) liability, which is limited to
If the cost of services provided his dependent under the Han-
dicapped Program in a particular month is less than theamount
prescribed for his pay grade, (see chart) the entire cost must be
paid by the service member. When the cost per month exceeds
the amount shown for his pay grade, he shall be required to pay
the amount shown for his pay grade plus the amount, if any, by
which ihetotal charge exceeds his payment and the Government's
maximum payment of $350.00.
f. The Government's share of the cost of benefits provided a
particular dependent under the handicapped program shall not ex-
ceed J350.00 per month except in cases of multiple dependents
incurring expenses.
ITEM 16. CERTIFICATION BY SOURCE OF CARE. This cer-
tificate must be signed prior to submission of claim for payment.
AMOUNT
PAY
GRADE
ARMY
MARINE CORPS
$ 45
E-9
Sergeant major
Sergeant major
Master gunnery sergeant
40
E-8
First sergeant
Master sergeant
First sergeant
Master sergeant
35
E-7
Platoon sergeant
Sergeant first class
Master sergeant '
Specialist Seven
Acting master sergeant 2
Gunnery sergeant
30
E-6
Staff sergeant
Sergeant first class l
Specialist Six
Acting gunnery sergeant
Staff sergeant
25
E-5
Sergeant
Specialist Five
Acting staff sergeant 2
Sergeant
25
E-4
Corporal
Specialist Four
Acting sergeant 2
Corporal
25
E-3
Private first class
Acting corporal 2
Lance corporal
25
E-2
Private
Private first class
25
E-l
Private
Private
Transitional t
Transitional I
COAST GUARD/NAVY
Master chief petty officer
Senior chief petty officer
Chief petty officer
Petty officer first class
Petty officer second class
Petty officer third class
Seaman
Seaman apprentice
Seaman recruit
Hie for those who held this grade continuously since 31 May 19S8.
itle for those holding pay grade 31 December 1958.
AIR FORCE
Chief master sergeant
Senior master sergeant
Master sergeant
Technical sergeant
Staff sergeant
Airman first class
Airman second class
Airman third class
Airman, basic
PAY
ARMY. AIR FORC
AMOUNT
GRADE
and MARINE COR
$250
0-10
General
200
0-9
Lieutenant general
150
0-8
Major general
100
0-7
Brigadier general
75
0-6
Colonel
65
0-5
Lieutenant colonel
50
0-4
Major
45
0-3
Captain
40
0-2
First lieutenant
35
0-1
Second lieutenant
COAST GUARD,
NAVY and ESSA
Admiral
Vice admiral
Rear admiral (upper half)
Rear admiral (lower half)
Captain
Commander
Lieutenant commander
Lieutenant
Lieutenant (junior grade)
Ensign
PAY
AMOUNT GRADE WARRANT OFFICERS
$50 W-4 Chief warrant officer, W-4
50 W-3 Chief warrant officer, W-3
45 W-2 Chief warrant officer, W-2
45 w-l Warrant officer. W-l
NOTE: Because of the numerous grade titles of
the personnel in the commissioned corps of the
Public Health Service, they have not been listed
on this form.
19
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20
correct and the co-insurance declaration statement. This last
statement is especially important if the beneficiary is a re-
tired member or his dependent.
Upon completion of treatment the remainder of the form
is filled out by the provider and submitted to one of the
fiscal administrators or hospital contractors listed on Ex-
hibit 6. In many cases, either because of the policies of
the provider or the desires of the sponsor/patient, the pati-
ent will pay the provider for the full cost of
the treatment and then submit a claim for reimbursement. The
actual recipient of the claim depends on the geographic area
where the treatment was provided. For example, in California
all inpatient claims are submitted to either Blue Cross of
Northern California or Blue Cross of Southern California. All
claims in the state from physicians and other non-hospital
type providers are submitted to Blue Shield of California.
Dental claims for California and all other states are sent
to the Colorado Dental Service, Denver, Colorado, while claims
from Christian Scientist practitioners are submitted to
Massachusetts Blue Cross, Boston, Massachusetts.
The claims processing procedures used by the various fis-
cal administrators and hospital contractors are fully described
in the CHAMPUS Program Manual issued by OCHAMPUS. Since the
inputs and required outputs are standardized, it will be as-
sumed that each of these agencies follows a somewhat similar
claims processing procedure. The systems described in the
21
EXHIBIT 6
CHAMPUS FISCAL ADMINISTRATORS
AND HOSPITAL CONTRACTORS
Alabama - Mutual of Omaha (BC)
Alaska - Blue Cross, Washington-Alaska, Inc. (BC)
Arizona - Blue Shield Medical Services (BC)
Arkansas - Blue Cross-Blue Shield, Inc. (M)
California - Blue Shield of California (BC)
Canada - Mutual of Omaha (M)
Colorado - Medical Service Inc. (BC)
Connecticut - Connecticut General Life Insurance Co. (BC)
Delaware - Blue Cross and Blue Shield of Delaware, Inc. (BC)
District of Columbia - Medical Service of District of Columbia
(includes all of Washington, D. C, and contiguous coun-
ties and cities of Maryland and Virginia) (BC)
Florida - Blue Shield of Florda, Inc. (M)
Georgia - Medical Association of Georgia (M)
Hawaii - Medical Service Association (BC)
Idaho - North Idaho District Medical Service (BC)
Illinois - Mutual of Omaha (M)
Indiana - Indiana State Medical Association (M)
Iowa - Iowa Medical Service (M)
Kansas - Kansas Blue Shield (M)
Kentucky - Physician's Mutual Inc. (BC)
Louisiana - Continental Life and Health Ins. Co. (M)
Maine - Associated Hospital Service of Maine (BC)
Maryland - Maryland Blue Shield (except areas near Washington,
D.C.) (BC)
Massachusetts - Blue Shield Inc. and Massachusetts Blue
Cross (BC)
Mexico - Mutual of Omaha (M)
Michigan - Michigan Medical Service (BC)
Minnesota - Minnesota Medical Service, Inc. (M)
Mississippi - Mississippi State Medical Association (BC)
Missouri - Missouri Medical Service (M)
Montana - Montana Physicians Service (BC)
Nebraska - Nebraska Medical Service (M)
Nevada - Nevada State Medical Association (BC)
New Hampshire - Vermont Physician Service (BC)
New Jersey - Medical-Surgical Plan of New Jersey (BC)
New Mexico - Surgical Service Inc., of New Mexico (BC)
New York - United Medical Service, Inc. (BC)
North Carolina - North Carolina Blue Cross and Blue Shield,
Inc. (BC)
North Dakota - Blue Shield of North Dakota (M)
Ohio - Mutual of Omaha (M)
Oklahoma - Oklahoma Physicians Service (M)
Oregon - Oregon Physicians Service (BC)
22
EXHIBIT 6 (CONTINUED)
Pennsylvania - Medical Service Association of Pennsylvania
(BC)
Puerto Rico - Mutual of Omaha (BC)
Rhode Island - Mutual of Omaha (BC)
South Carolina - Mutual of Omaha (M)
South Dakota - South Dakota Medical Service, Inc. (M)
Tennessee - Blue Cross and Blue Shield of Tennessee (BC)
Texas - Mutual of Omaha (M)
Utah - Blue Shield of Utah (BC)
Vermont - Vermont Physician Service (BC)
Virginia - Blue Shield of Virginia (except areas near
Washington, D. C.) (BC)
Washington - Blue Cross of Washington-Alaska, Inc. (BC)
West Virginia - Medical Surgical Care, Inc. (BC)
Wisconsin - Wisconsin Physicians Service (M)
Wyoming - Wyoming Medical Service, Inc. (BC)
All Dental Claims - Colorado Dental Service
All Christian Scientist Claims - Massachusetts Blue Shield,
Inc.
NOTE: Hospital contractors are indicated in the above list
by letters in parenthesis: (M) denotes Mutual of
Omaha and (BC) denotes Blue Cross Association.
23
following sections can thus be considered as a representative
example of the claims processing systems utilized by the
CHAMPUS contractors.
A. BLUE CROSS ASSOCIATION
As noted in Exhibit 6, the Blue Cross Association is the
primary hospital contractor for inpatient care in thirty-three
geographic locations. Each geographic location's Blue Cross
organization acts as a subcontractor to process CHAMPUS claims
Blue Cross of Northern California, located in Oakland,
California, is typical of these subcontractors. Its area of
responsibility is all of Northern California, that is, all of
California North of an imaginary line drawn across the state
just to the North of Los Angeles County [Ref. 4].
Blue Cross receives approximately 905 inpatient claims per
week. The average turnaround time for CHAMPUS claims, from
the time the claim is received until the payment check goes
into the mail, is seven to eight days. Exhibit 7 depicts
the general flow of the claims processing system used by Blue
Cross of Northern California. Information concerning the
rate structures and the process concerning the "CL-60" is
considered confidential information and, as such, was not
made available. About 25 percent of all claims cannot be
processed on the first submission due to errors and incomple-
tions. The most common errors experienced by Blue Cross are:
1. Errors in dependent identification care information.
24
EXHIBIT 7
CHAMPUS PROCESSING SYSTEM
CHAMPUS CLAIM, DA-1863-1
CALIFORNIA
BLUE SHIELD
HOSPITAL
MAIL ROOM
!lo
ROVIDER
Relations
Copy 1
PLETE
■m
A
(files)
Data
Control
KEYPUNCH
Thursday
Check
Tabulation
Wednesday
i
I
HOSPITAL
ATTACH
PATIENT
Claims/Cards
Finance
I
Medical
Review
Invoiced to
Blue Cross
Association
OCHAMPUS
DENVER
25
2. Physician's name illegible, missing, or is not on
their list of qualified hospital staff members.
3. Item thirteen, Other Insurance, was not marked to
indicate whether other forms of health insurance were owned
by the patient.
4. The diagnosis, as listed, was incomplete or of a
questionable nature.
5. A non-availability statement was not attached to the
submitted claim.
Upon receipt, all claims are date stamped in their Mail
Room. They are then given to processors and are entered into
the processing system. Each processor reviews items one
through thirty-four (See Exhibit 2) to make certain that the
claim is complete. They also review and determine benefit
and patient eligibility. If the claim is incomplete, or if
it is determined that a review of the diagnosis is needed,
the claim would be returned to the provider or forwarded to
Medical Review. In the former instance the provider hospital
completes the missing information or corrects the errors and
resubmits the claim to Blue Cross. In the latter instance
a member of Medical Review makes a determination of the diag-
nosis as being eligible or not eligible as a benefit of the
CHAMPUS Program. The claim is then either returned to the
provider or re-entered into the processing system. It should
be noted that these reviews are for patient and benefit
eligibility only. If it is determined that a diagnosis is
26
not properly a benefit, the liability for payment of the claim
falls back upon the patient. This particular feature of the
CHAMPUS Program is true if the determination is made as either
part of the processor review, a Medical Review, or an OCHAMPUS
review.
The second review, accomplished by other than the person
doing the first review, is for quality control. In this re-
view, every item on the form is looked at for correctness.
If an error is found, the claim is returned to the first pro-
cessor for action in obtaining the correct information. If
no errors are found, the claims are separated, i.e., originals
from carbons. The processor then reviews the carbon copies
to make certain all entries are correct and readable.
The third and final review is a recheck of the entire
claim by a third person for completeness and correctness.
Once this review is accomplished, an adding machine tape is
prepared for the originals and the carbons. The tapes are
compared, and if they are in agreement, the carbon copies and
their adding machine tapes are sent to Data Control for keying
into the computer system for further processing procedures.
Details concerning the computer processing system used by
Blue Cross were not made available for this study.
It was learned, however, that if there is a problem con-
cerning charges, the problem would be resolved by persons in
the Blue Cross CHAMPUS Department, their Provider Relations
Department, and the provider's representatives prior to the
27
payment of the claim. Upon completion of processing proced-
ures, a batch invoice is sent to the Blue Cross Association
in Chicago, Illinois. This invoice, which is sent by tele-
graphic wire, is prepared on a weekly basis. Each invoice
states the amount of claims that Blue Cross of Northern
California expects to process in that week. The Blue Cross
Association responds by sending Blue Cross of Northern
California, and all other Blue Cross Associations, a check
for the invoiced amount plus or minus a figure which represents
adjustments based on the past week's actual claims processing
actions. The Blue Cross Association then invoices a composite
amount for all their subcontractors claims processing actions
to OCHAMPUS for reimbursement. The OCHAMPUS reimbursement
process will be discussed in the following chapter.
B. MUTUAL OF OMAHA INSURANCE COMPANY
The other major hospital contractor is the Mutual of Omaha
Insurance Company headquartered in Omaha, Nebraska [Ref. 5].
They handle CHAMPUS hospital claims for nineteen geographic
areas. This company is also a fiscal administrator for non-
hospital type claims, except for dental and Christian Scientist
claims. They are responsible for processing the outpatient
type of claim for nine geographic areas (See Exhibit 6) . Un-
like the Blue Cross Association, they do not use a subcon-
tractor system but rather process all claims in one central
office. This is evidenced by the fact that they receive, on
a weekly average, about 4,600 CHAMPUS hospital type claims
28
and more than 10,000 non-hospital type claims. Claims for
drugs and durable equipment make up approximately 7.5 percent
of the latter figure.
Mutual of Omaha employs a fully integrated, dedicated
computer system for its claims processing. Exhibit 8, a
simplified flow chart, provides an idea of the claims process-
ing procedures that are followed in utilizing this on-line
computer system. The system is composed of an IBM 14 5 dedi-
cated computer utilizing IBM disc packs and high speed tape
drives. Auditor interface with the computer is accomplished
through Bunker-Ramo cathode ray tubes and control units. As
much of the processing as could be possibly delegated to com-
puter action has been built into this system.
The on-line system permits Mutual of Omaha to process all
CHAMPUS claims in 24 hours. All claims that are entered into
the system on a given day go through a batch cycle that night.
The issued checks are ready for processing and mailing the
next morning. Claims requiring extensive audit activity,
medical review, or additional information may be held in the
system for up to 3 0 days. Automatic review points have been
established in the system so that requests for additional
information are followed-up in 4 5 days if no response has been
received by that time.
Like Blue Cross of Northern California, Mutual of Omaha
has found that about 25 per cent of its claims have clerical
errors. Of these, about 7 0 percent need clarification of or
29
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30
have errors in patient eligibility. That is, clarification
in the relationship of the patient to the sponsor, the identi-
fication card number, or the beginning or expiration date of
eligibility is needed.
Mutual* s claims rejection rate is less than one percent.
Claims are usually rejected either because care was rendered
prior to the beginning eligibility date as shown on the claim
form or after the expiration date of the patient's identifica-
tion card as shown on the claim form. These reasons for re-
jection account for about 7 5 percent of all rejections, the
remaining rejections caused primarily by the reason that the
care provided was not a benefit under CHAMPUS regulations.
In the processing of inpatient claims each claim receives
a series of reviews similar to those used by the Blue Cross
organization. Itemization on the face of the claim is sum-
marized to determine correctness of the totals. Dates of
care must correspond to the number of days being billed and
the charge per day must meet the provider ' s record of room
charges supplied to Mutual and recorded in the computer.
Ancillary services provided by the hospital are reviewed on
the basis of "reasonableness" of the charges for the services
rendered. All hospital claims are processed on the basis of
billed charges. The patient's deductible is computed based
on the length of stay for active duty dependents and on the
basis of the patient's co-insurance requirement for retired
beneficiaries. This co-insurance feature is a term used by
31
Mutual to account for the requirement that retired persons
must pay 25 percent of all charges for the care that they
receive.
The same basic processing system is used for processing
non-hospital type claims. Mutual determines whether a physi-
cian's charge is his customary charge for similar services and
that this customary charge does not exceed the prevailing
charge in the locality for similar services. Profiles are
maintained on all CHAMPUS physicians and these are periodically
reviewed. Once a year the pricing file mechanism is updated
to include the most current information on physicians in
Mutual' s contract territory.
In the actual claims processing procedure, Mutual 's sys-
tem is on a filtration type. All claims pass through the
audit staff. Claims that represent special problems are re-
ferred to a second audit level, and from that point, are re-
ferred to a Medical Review Committee. This committee is com-
posed of registered nurses, senior department personnel, and
corporate associate medical directors. The function of the
various audit levels is to determine whether or not the
patient is an eligible beneficiary and whether the diagnosis
and treatment received are proper benefits of the CHAMPUS
Program. At one of these audit levels, a claim is released
for appropriate payment or rejected. Providers may request
a review of decisions through peer reviews at the state level
or they may seek a review by OCHAMPUS .
32
Funds to cover payments to providers or beneficiaries
are forwarded by wire by OCHAMPUS to Mutual * s depository
bank to cover CHAMPUS payments issued. A billing is sent to
OCHAMPUS on a weekly basis covering the week's activities.
The Mutual system maintains, on-line, eighteen months of
patient records. In total, they maintain five years of
patient records. Co-insurance and deductible calculations
are taken by the computer and are maintained in the patient
records. A three year patient deductible record is maintained
in an active status in order to prevent duplicate payments.
Reports generated by Mutual * s system include a monthly
claims activity report, a weekly billing report, and any
special reports requested by OCHAMPUS. Internally, reports
on auditor productivity, claims distribution listings showing
action taken on all items cleared through the computer, and
bank reconciliations are generated on an automatic basis by
the computer.
C. BLUE SHIELD OF CALIFORNIA
Except for the several geographic areas covered by Mutual
of Omaha, most geographic area state medical associations,
state Blue Shield organizations, or other similar service
agencies or insurance companies process non-hospital type
claims. Blue Shield of California is typical of these state
organizations [Ref. 6].
Blue Shield receives about 20,000 CHAMPUS claims per week.
About 60 percent of these claims are from providers, the
33
remainder from beneficiaries. Approximately 30 percent of the
claims contain some type of error. About 95 percent of these
errors can be corrected via telephone calls to the provider.
Blue Shield experiences a 20 percent claims rejection rate.
Claims cannot be processed and thus must be rejected for one
of three main reasons:
1. The deductible requirements have not been met.
2. The beneficiary is ineligible for treatment.
3. The care received is not a benefit under the CHAMPUS
Program.
The Blue Shield claims rejection rate is higher than Blue
Cross and Mutual for several reasons. First, Blue Shield
handles all types of claims except hospital claims. The out-
patient benefits are numerous and, in many cases, not speci-
fically defined. It is felt that many providers, i.e.,
physicians accept a patient and treat a condition that they
consider a benefit. During claim review the condition or
treatment is determined not to be a benefit. Another reason
for the high rejection rate is thought to be the lack of
trained clerical personnel in most physician's offices.
Normally, a physician will have one or two nurses in his of-
fice. These persons are not fully aware of the CHAMPUS bene-
fits. Still another reason is thought to be that of "we're
not certain so we'll submit a claim" reasoning by the depend-
ent.
Exhibit 9, a simplified flow diagram, indicates the pro-
cessing procedures used by Blue Shield of California. As
34
EXHIBIT 9-A
C II A H P U S S Y S T E
Sort
Correspondence
2
NCOMING
Hail, Claims,
Correspondence
■<£
orrespondence
&
ICN AND
Batch 2A
Assign To
'Corresponded
Jo Complete
2B
V
When Completed
Mail Reply 2C
ICN, Batch &
Activate Batch
Sequence No,
4
Microfilm
The Claim 5
\/
Claims
Examination
Provider No.
Look Up 7
Completed
Batches Go
To Keytape
1,
CORREPSOMDENCE
6%
2.
Assigned Drugs
2%
3.
Assigned Medical
rSZ
4,
Non-assigned Medical
& Drugs
Zu/o
5.
Handicap
1%
6.
Other Insurance
007
Z/o
7,
Hospital
5%
8.
Pathology
9.
0,
Over $1,000 >
UAR
1%
Exception
Routed Claims
60 To Devel-
ment 6A
Return To
Sender GB
T
35
EXHIBIT 9-B
Keytaped
Claims
COMPUTER SYSTEM
EDIT
Duplicate History Check-Elig
Pricing
'uplicate Check
eductible Calculated
ontrol System Update
LI
T
Pending Claims
Provider File
Profiles
Drug Pricing
DMP File
L Yr. Duplicate
5 Yr. Deductible
n OTHER REPORTS
One Line Status
Financial Control
Control
Open ite
eports
MS
Update Exceptions
Input Exceptions
14
fi*EEN
Sheets
Staged
The Cla
Blue
ARE
Rim
im 23
I
To
RMS System
Suspense
Take Actions
Indicated 24
nactivate
Claim
Corrected
Green & Blue
'1099 Data
■JR Data
.Profile Data
17
To
Various
Systems
OB's
)eductible's
Check Regis
21
Paid Full Status"
Paid Case (Micro-
film), End-of-
Month Reports
22
36
the claim is received, it is issued an Insurance Case Number
(ICN) composed of one digit for the year, three digits for
the Julian day of the year, a batch number, and a claim num-
ber within the batch. Prior to the assignment of an ICN, the
claims are sorted into one of ten claims classifications used
by Blue Shield (See Exhibit 9-A) . They are also given a pre-
liminary screening for completeness at this point. All
claims are then batched according to classification and an
ICN assigned. No more than fifty claims are assigned to the
same batch number. After assignment of the ICN the claims
are microfilmed and processing begins.
In the claims examination step claims are examined for
correctness and completeness. Claims requiring development
of missing or erroneous data are separated to a Claims
Development Section. All possible errors are corrected by
telephoning the provider for the missing information or to
obtain the correct data. In case a telephone call cannot
clear up the errors, the form is returned to the provider
for completion and correction.
After all the data is obtained or corrected, the claims
reenter the system. Claims that do not require additional
work go to provider look-up where the provider's code is
checked to ascertain whether he is a qualified, participating
provider. From this point all the claims are collected by
batches and sent to San Diego where they are keyed directly
to computer tape by Blue Shield's computer services
37
contractor. The information on the tapes is then fed direct-
ly to the Blue Shield computer center in San Francisco via
direct wire data link.
Blue Shield, as the Fiscal Administrator for the out-
patient CHAMPUS Program in California, pays claims in accord-
ance with the "usual," "customary," and "reasonable" charge
concept. This is commonly referred to as a Provider Profile
System, and is considered by Blue Shield as one of the most
efficient and equitable mechanisms for administering payments
to providers and beneficiaries.
On the other hand Blue Cross and Mutual, when processing
inpatient claims, administer payments under one of three
methods. The first method, a negotiated Per Diem Reimburse-
ment, is not widely used. In this method of reimbursement a
per diem figure for each day of covered care is arrived at by
negotiation. The per diem rate need not be directly related
to hospital charges or costs. Under this method the daily
reimbursement decreases as days of hospitalization increase
until a lower limit is reached. This method of reimbursement
is not used by most hospitals because it is too difficult to
justify to regulatory agencies.
The second method used is called Reimbursement Rate Based
Upon Hospitals Retail Charges. Retail charges refer to
regular room rates and normal billings for special service
any patient would pay. These are now construed to mean a
price at least equal to, and most probably above, the actual
38
cost per patient day of providing hospital accommodations.
The retail charges are the maximum reimbursable limits. In
many instances the "retail charge" is set as an average of
all hospital in a given Blue Cross Plan. These rates are
normally simple to derive but there is the constant possi-
bility that some hospitals will overcharge. This method of
reimbursement is also declining with most hospitals that use
it located in the South.
The last, and most commonly used method, is termed Re-
imbursement Based Upon Hospital Costs. In this method the
hospital is reimbursed for actual costs incurred in providing
services. This method is a type of negotiated method in that
Blue Cross or Mutual and the hospital must agree as to what
allowable elements are to be used in calculating the costs.
Normally, there is a minimum cost stipulation, called a floor,
which is a certain percentage of each size or locational group-
ing of contracting hospitals. There are also ceilings, or
maximum allowable costs, normally stated as a proportion of
average costs among hospitals of similar nature and size.
A "floor" rewards a hospital with costs which are less than
the minimum while a "ceiling" penalizes a hospital with high
costs (usually a specialty hospital) . This method is amenable
to hospitals non-profit status and insures that a hospital
will receive amounts adequate to cover expenses. There is,
however, some question that this method might encourage
inefficiency.
39
Under the Provider Profile System, a provider's charge
is considered an allowable charge if it is his "individual"
charge for the service and if it is within the "area range"
of charges made by providers in the same community for the
same service, or if it is judged to be "reasonable" by local
peer review, considering all of the medical facts and cir-
cumstances .
The criteria considered in determining allowable charges
are individual charges (Usual) and area charge (Customary
Range) . Individual charge is the amount the provider usually
and most frequently charges for a specific service. These
charges are not necessarily uniform or static, but may vary
among providers and with the passage of time. Area charge is
the amount most frequently and most widely charged in a local
community by providers for a specific service. These charges
reflect factual data on an overall charge pattern existing
within a specific and limited geographical area. They tend
to cluster about a certain figure which might be statistically
identified as the "mean" or the "median." The degree of
specialization, population density, as well as other items
concerned with the economics of a provider's practice, which
may vary from one locality to another, are all taken into
account in determining the area charge.
Every charge which a provider makes for services rendered
to beneficiaries of Blue Shield-administered programs, and
the Company's private business — as indicated by submitted
40
claims — are recorded to his account and stored on the com-
pany's computer tapes by provider name and license number,
procedure or service rendered, billed charge, and his practic-
ing address. A continuous record is kept of all charges made
to the Fiscal Administrator from each provider for services
he performs. These charges, over a given period of time, usu-
ally one year, are used as the data base in calculating the
provider's profile.
The provider's individual charge for each of the services
which make up his "profile" are updated annually in order to
reflect changes which may have taken place in his pattern of
charges. A general profile update is accomplished in July of
each year and is based on all billed charges for the preceding
calendar year. Thus, the update in July 1974 will be based
on all billed charges for the period of January to December
1973.
To calculate the allowed charge, the "individual" charges
for a specific service are arrayed from the lowest billed
charge to the highest. For example, a provider submitted
claims for 41 routine office visits; for ten of these visits
he charged $10, for 15 visits he charged $12, and for the re-
maining 16 visits he charged $15. The median would be that
point at which one-half of the 41 visits were charged. In
this case, he charged $10 and $12 a total of 25 times and $15
on 16 occasions. Therefore, his individual charge is calcu-
lated to be $12. The allowable amount is then determined by
41
the lesser of the billed amounts, the individual profile, or
the area charge. In this case, $12 would be the allowed
amount .
Since Blue Shield does not pay claims on the basis of a
fee schedule, but under the UCR concept, when the computer
prints out a check for payment of an amount below that which
was billed by a provider, it signifies that the billed charge
was above the provider ' s individual charge or above the area
range. It does not necessarily indicate that the charge was
not reasonable as it may be justified concerning the special
circumstances of that particular case.
Any provider who believes that his charges have been un-
fairly reduced, or that circumstances justify an increased
fee in certain cases, has the right to request review by an
Advisor of his specialty, or he can avail himself of the ad-
vice and assistance of his local peer review committee that
each county and district medical society has appointed for
that purpose. In recent Blue Shield history few providers
have requested more than one review of disputed payments.
In no case, however, can a provider bill the patient for
the difference between the amount he claimed and the amount
he received. One of the provisions of agreeing to accept
CHAMPUS patients is that of the full payment concept. Under
this concept, the amount determined by the fiscal administra-
tor to be the reasonable charge for the service provided is
considered as payment in full. A physician agrees to this
42
concept when he signs and submits a claim. The only exceptin
to this concept is for those charges that relate to a case
which is not a proper benefit of CHAMPUS.
Under the terms of the existing contract that Blue Shield
has with the Federal Government/ one of the contractual obli-
gations is that CHAMPUS payments conform to the concept of
usual, customary, and reasonable, and that payments made to,
or on behalf of, CHAMPUS beneficiaries, not be higher than
payments made to, or on behalf of, the company's policyholders
and subscribers, when services are comparable and furnished
under comparable circumstances. The UCR is, as a matter of
policy, used in determining payable amounts by Blue Shield
in the operation of its private business as well as in the
operation of its government business.
Several years ago, Blue Shield, in cooperation with its
parent organization, the California Medical Association, con-
ducted a Relative Value Study. This study formalized the pro-
cedures used by a physician and assigned each procedure a
code number. Each procedure was also assigned a value in
terms of units. The definition of a unit of value as used
in the RVS is vague. For example, the 19 69 RVS states that
the unit value for a brief evaluation, history, examination
and/or treatment for a new patient is 20.0. For an established
patient a brief examination, evaluation and/or treatment of
the same or new illness has a unit value of 12.0. The only
difference in the two is the new patient receives a history.
Does the taking of a medical history have a value of 8.0, the
43
difference in the above values? One cannot say for certain
because an initial limited history and physical examination
for a new patient has a unit value of 30.0.
Thus one must conclude that the concept of unit value
centers around the time involved, the types of services pro-
vided, the types of and the amount of supplies and materials
used, the use of paramedical personnel (nurses) and the amount
of knowledge or expertise that must be utilized in providing
the service.
A unit of value was further assigned a dollar amount.
It is from this study that the physician's reasonable fee is
computed. For example, an office visit may be assigned the
RVS code number 9004. Assume that the usual value for this
procedure is four units based on the time involved, the
complexity of care provided, and all other factors. Further
assume a unit of value is worth $6. Thus, a "reasonable"
fee for an office visit is computed to be $24. Using this
system permits Blue Shield to compute "reasonable" fees in
those special cases where the usual or customary fee is not
applicable.
It is important to note that an individual physician's
"usual" fee rate may be influenced by his offering of "pro-
fessional discounts." These discounts, normally offered to
other physicians and other medical personnel, tend to lower
his "usual" fee since they are part of the overall collection
of billed charges that Blue Shield maintains in the Provider
44
Profile System. It is also interesting to note that, on
occasion, a provider can influence his "usual" fee by moving
the location of where he provides the service. Thus, by mov-
ing from an area close to a hospital to an area further re-
moved from the hospital he may be able to raise his usual
fee. The effect of such a move would not, however, be re-
flected in the payments he receives until a year later because
of the time lag in adjusting the pricing mechanism in Blue
Shield's system.
An interesting feature of the Blue Shield System is that
the computer automatically generates audit sheets. A Green
Sheet Audit, titled CHAMPUS CORRECTIONS, printed appropriate-
ly on green paper, is generated when errors are encounted in
the patient history data. That is, errors are found in Items
one through thirteen of the claim form. These Green Sheet
Audits, a sample of which is shown in Exhibit 10, are collated
with the claim containing the errors. When the error has
been corrected, the audit sheet's corrections are entered in-
to the computer through on-line cathode ray tube and control
units .
Blue Sheet Audits, titled CHAMPUS SUSPENSION LISTING,
printed on blue paper, are automatically generated when pro-
vider identification and/or pricing errors are encountered.
These errors are corrected and fed into the computer in the
same way as are the Green Sheet Audits. Uncorrectable data
on either of the audit sheets causes the claim to be returned
45
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46
to whomever originally submitted it to Blue Shield. Exhibit
11 is a sample of this form. When all of the indicated cor-
rective actions have been taken, the carbon copies of these
audit sheets are filed with the batched claims. The originals
of the audit sheets are disposed of in a recycling process.
One of the main reports generated by the Blue Shield sys-
tem is a "one-line status report." This report is generated
at the completion of each batch run and provides Blue Shield
with the status of every claim in process or completed during
the run. A sample page of the report is shown in Exhibit 12.
In reading the report the notation "pended claim" in the check
number column indicates a claim in which some data is missing
or is incorrect and, as a result, a Green Sheet Audit or a
Blue Sheet Audit was printed. Such claims are held in an
active status in the computer for 30 days. The notation "de-
lete" in the Check Number column indicates a claim which has
been rejected by the system.
Blue Shield keeps a microfilm record of all claims for
two years and retains microfilm records of processing actions
for five years. Samples of these two microfilm records
titled "CHAMPUS PAID FULL LISTING - DECEMBER 1974" and
"CHAMPUS ALPHABETIC CROSS REFERENCE" are shown in Exhibits
13 and 14 respectively. These files are necessary to keep
track of deductibles and co-insurance to prevent duplicate
claims and to provide a complete family history as required
by CHAMPUS regulations.
47
EXHIBIT 11
CALIFORNIA BLUE SHIELD
CHAMPUS SUSPENSE LISTING 01-14-75 page 04 of *
SPONSOR NUMBER
500980002: 9
558360861:
1 I 1
ACT
LINE
SPONSOR LAST NAME
(1
Ml
SERVICE NUMBER
SOCIAL SECURITY NO
CLERK
HANDICAP
f
i
00
DAVIS
0
J
558 36 0861
C21S
01
02
03
04
05
oe
07
OB
09
A( 1
LINE
ASN
PATIENT FIRST NAME
M»
DEDUCTIBLE
DIAG
HHK
TOTAL BILLED
PATIENT PAID
OTHER INS
00
V
NORMA
J
0 00
508
0 00
0 00
,,
12
13
i« 4
15
J 6
17
*
18 *
19 A
ACT
LiiH
ACT
DATE FILLED
OATE OF SERVICE
PRESCRIPTION NO
PRQCEOURf NO
AMOUNT BILLED
N/R
TOS
MULT
SERV
PROV
coot
PROVIDER NUMBER
PROV
NAME
N/C
MSG
DRUG CODE
PRICE ADJ
ACT
")
A9
11 25 74
99070
28 00
c
I 0
51
00C12368O
RO
9988
0 00 !
21
22
23
24 A
26
26 A
27
28
29 i
J3)/
31
32
. >%
2 IK
REJECT REASON
N/P - R/C -
- MR
DUPLICATE ICN
DATE PAID
DUPLICATE ICfT
DATE PAID
OUP
•
0 71
LOC
01
LEVEL 1
0 ooc
LEVEL 2
0 00
LEVEL 3
0 00
PRICING MESSAGE
BY REPORT
PROCEDURE ON RVS FILE
ACT
LINE
ACT
OATE FILLED
DATE OF SERVICE
PRFSCRIPTIONNO
PROCEDURE NO
AMOUNT BILLEC
N R
TOS
MULT
SERV
PROV
CODE
PROVIDER NUA'BER
PROV
NAME
N/C
MSG
DRUG CODE
PRICE ADJ
ACT
17
A6
10 10 74
90050
11 00
1
1 0
51
00C123680
RO
40
9005
10 50
21
22
23
24 A
25
2S A
27
26
29 j
30
31
32 A
33
21K
REJECT REASON
— —
DUPLICATE ICN
DATE PAID
DUPLICATE ICN
DATE PAID
A00
our
0 71
LOC
01
LEVEL 1
11 00
LEVEL 2
10 50
LEVEL 3
11 40
PRICING MESSAGE
REAS AT Lf
■Vl/CUT AT LEV2
/REAS AT LEV3/ PAY LEVEL 2
ACT
LINE
ACT
DATE FILLED
DATE OF SERVICE
PRESCRIPTION NO
PROCEDURE NO
AMOUNT BILLED
N/R
MULT
SERV
PROV
CODE
PROVIDER NUMBER
PROV
NAME
N/C
MSG
DRUG CODE
PRICE ADJ
ACT
21
22
23
24 A
25
26 A
27
28
29
30
31
32 A
33
REJECT riEASON
DUPLICATE ICN
DATE PAID
OUPLICATE ICN
DATE PAID
ADO
OUP
LOC
LEVEL 1
LEVEL 2
LEVEL 3
PRICING MESSAGE
ACT
LINE
ACT
" DTTT'FILLED
DATE OF SERVICE
PRESCRIPTION NO
PROCEOURE NO
AMOUNT BILLED
N/R
TOS
MULT
SERV
PROV
CODE
PROVIDER NUMBER
PROV
NAME
N/C
MSG
DRUG CODE
PRICE AOJ
ACT
21
22
23
24 A
25
26 a
27
28
29
30
31
32 A
l3
REJECT REASON
DUPLICATE ICN
DATE PAID
OUPLICATE ICN
DATE PAID
ADO
our
LOC
LEVEL 1
LEVEL 2
LEVEL 3
PRICING MESSAGE
ACT
LINE
ACT
DATE FILLED
DATE OF SERVICE
PRESCRIPTION NO
PROCEOURE NO
AMOUNT BILLED
*/R
OS
MULT
SERV
PROV
CODE
PROVIDER NUMBER
PROV
NAME
N/C
MSG
DRUG CODE
PRICE AOJ
ACT
21
22
23
2* A
25
26 A
27
28
29
30
31
32 A
33
REJECT REASON
DUPLICATE ICN
DATE PAID
OUPLICATE ICN
OAIE PAID
OUP
LOC
LEVEL 1
LEVEL 2
LEVEL 3
PRICING MESSAGE
009 800
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51
Blue Shield receives payment directly from OCHAMPUS in
the same way as Mutual does. Once a week an estimate of the
dollar amounts to be paid is wired to OCHAMPUS. OCHAMPUS
responds by depositing funds in Blue Shield's depository
bank. The estimates are followed up by a more detailed in-
voice and OCHAMPUS makes the appropriate adjustments in sub-
sequent payments. Copies of computer tapes of claims pro-
cessed are also sent to OCHAMPUS.
Blue Shield reports that it is currently able to process
and make payment on over 80 percent of the CHAMPUS claims in
five to seven days. The system will hold a "pended" claim
for thirty days and will then generate a special follow-up
report. Further action is taken if no response is received
by the end of 45 days.
52
CLAIMS PROCESSING - OCHAMPUS
Upon completion of the claims processing by one of the
47 fiscal administrators/hospital contractors, a check is
sent to either the provider or to the beneficiary as applica-
ble. The contractor then submits a bill to OCHAMPUS for re-
imbursement. This chapter will examine the process by which
OCHAMPUS adjudicates the contractor's claim [Ref. 7].
A. CONTRACTOR ADVANCES
As noted earlier, the contractor begins the reimbursement
procedure by telephoning OCHAMPUS for an advance of funds to
offset the checks being mailed out. This procedure, referred
to as a wire or telegram in the preceding chapter, is received
in the Finance and Accounting Division of the Contract Manage-
ment Directorate of OCHAMPUS. Whomever answers the telephone
records each call on a preprinted "Routine and Transmittal
Slip," Optional Form 41 shown in Exhibit 15. The name of the
person calling, the state contractor he represents, the amount
requested, the invoice number, and the period covered are
carefully noted and are repeated back to the caller to verify
accuracy. The person taking the call then signs and dates
the slip. Additionally, the exact time of the call is noted
on the form.
During the call the person in the F&A Division checks a
blackboard euphemistically termed the "Advances Status
Board." If a state contractor has two or more outstanding
53
EXHIBIT 15
ROUTING AND TRANSMITTAL SLIP
ACTION
1 TO
STATE:
Initials
CIRCULATE
DATE
COORDINATION
2
PERSON CALLING:
INITIALS
FILE
DATE
INFORMATION
3
PARTIAL PAYMENT NO:
INITIALS
NOTE ANO
RETURN
OATE
PER CON •
VER3ATI0N
*
VOUCHER NUMBER:
INITIALS
SEC ME
OATE
SI6NATURE
REMARKS
AMOUNT $
INVOICE NUMBER:
PERIOD COVERED:
Do NOT use this form as a RECORD of approvals, concurrences,
disapprovals, clearances, and similar actions
FROM
OATE
PHONE
OPTIONAL FORM 41
AUGUST 1967
GSAFr-M* (41CH) 100-11.206
>tn iwo'-ui-ut 3041-101
54
advances, that is, advance payments that have not been sub-
stantiated by an invoice, they are advised that no further
advances will be processed until the oldest of the advances
have been invoiced to OCHAMPUS. If their state is not on the
board their advance funds request is processed. The process-
ing procedure begins with the assignment of a Voucher Number.
This number is composed of the fiscal year plus a four digit
consecutive code. For example, 75-1818 represents the 1,818th
voucher for Fiscal Year 1975. Next a Standard Form 1034,
Public Voucher for Purchases and Services Other Than Personal,
is prepared. This form is shown in Exhibit 16. These forms
are collected and taken to the Fitzsimmons Army Medical
Center Disbursing Office daily at 2:00 P.M. This office pro-
cesses the vouchers, sends the necessary data to the OCHAMPUS
Computer Operations Division for check preparation, and re-
turns to collect the prepared checks the following day.
When the OCHAMPUS F&A personnel appear at the Disbursing
Office with the next batch of vouchers, they pick up the
completed vouchers and checks from the preceding day's batch.
These checks are taken immediately to the branch bank
located on the FAMC grounds where they are deposited in a
special account. Special deposit slips listing the voucher
numbers and check amounts are prepared and signed by the bank
manager. At 3:00 P.M. that same day the checks are taken
by special bank messenger to the main bank office in down-
town Denver. Early the next morning the bank sends the funds
55
EXHIBIT 16
St.iiiil.ircl Form No. 1034
7 CM) 5000
io.it n t-rm
PUBLIC VOUCHER FOR PURCHASES AND
SERVICES OTHER THAN PERSONAL
VOUCHER NO
US DEPARTMENT, BUREAU, OR ESTABLISHMENT AND LOCATION
DEPARTMENT OF THE NAVY
DATE VOUCHER PREPARED
SCHEDULE NO
CONTRACT NUMBER AND DATE
PAID BY
REQUISITION NUMBER AND DATE
r
PAYEE'S
NAME
AND
ADDRESS
DATE INVOICE RECEIVED
DISCOUNT TERMS
L
J
PAYEE'S ACCOUNT NUMBER
SHIPPED FROM
GOVERNMENT 8 L NUMBER
ARTICLES OR SERVICES
(Enter description, item number of contract or Federal
supply schedule, and other information deemed necessary)
NUMBER
AND DATE
OF ORDER
DATE OF
DELIVERY
OR SERVICE
QUAN-
TITY
UNIT PRICE
PER
AMOUNT
(1)
(Use continuation sheets) W necessary)
(Payee must NOT use the space below
TOTAL
PAYMENT:
]] COMPLETE
"2 PARTIAL
] FINAL
~| PROGRESS
]] ADVANCE
APPROVED FOR
EXCHANGE RATE
DIFFERENCES,
= $
:$1.00
BY'
TITLE
Amount verified; correct for
{Signature «r initials)
Pursuant to authority vested en me, I certify that this voucher is correct ond proper for payment.
(»«lc)
(Autlwriztil Certifying Offit
ACCOUNTING CLASSIFICATION (Revised 7-65) (Appropriation Symbol must be shown; other classification optional]
Appropriation
Symbol and Subhead
Object
Class
Bureau Control
and Suballot. No.
Auth. Acclg.
Activity
Type
Property
Acetg. Acty.
Cost Code
I R. No's
CHECK NUMBER
ON TREASURER OF THE UNITED STATES
CHECK NUMBER
ON [Name of bank)
PAYEE'
CASH
$
DATE
1 When stated in foreign currency, insert name of currency.
'If the ability to certify and authority to approve are combined in one person, one signature only is necessary; other-
wise the approving officer will sign in the space provided, over his official title.
'When a voucher is receipted in the name of a company or corporation, the name of the person writing the company
or corporate name, as well as the capacity in which he signs, must appear. For example "John Doe Company, per
John Smith, Secretary", or "Treasurer", as the case may be.
PER
TITLE
ill I GOVERNMENT PRINTING OfflCE 1970— 366 376
56
out over the Federal Reserve System's Bank Wire System, a
direct telegraphic wire system. The funds go directly to the
contractor's depository bank for deposit and advice. The
latter term means that someone in the receiving bank will
notify the contractor of the receipt of funds. (It should
be noted that each bank wire costs the OCHAMPUS command
$4.50. Over $600 per month is spent on these bank wires.)
When the completed vouchers are returned to the F&A
Division, the appropriate entries are made in the accounting
ledgers to record the commitment of the funds. The average
processing time for advances is thus about 2.5 days from re-
ceipt of the telephone request for funds to actual receipt
of the funds by the contractor.
B. CONTRACTOR INVOICES
As a follow-up procedure, each contractor is required to
submit an invoice and a computer tape of all claims included
in the invoice period. Included in the invoice package is
a Control Listing which provides, in summary form, the total
number of claims by claim category, i.e., Physician, Hospi-
tal, Drug, Handicapped, etc., and the total professional
charges for each category of claim. Exhibit 17 is an example
of such a control listing. Copies of actual invoices were
not available from OCHAMPUS or the contractors previously
discussed.
57
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58
Upon receipt of an invoice package the OCHAMPUS Mail Room
initiates a CHAMPUS Form 17 4, OCHAMPUS Voucher Transmittal,
by entering an internally controlled batch number and the date
received. The same information is placed on a label which is
attached to the reel of computer tape. The original of the
Form 174, shown in Exhibit 18, is sent to the Finance and
Accounting Division with the contractor's Control Listing
and the Invoice. The copy of the form, which is printed on
yellow paper, is sent with the computer tape to the OCHAMPUS
Computer Operations Division.
The Finance and Accounting Division, upon receipt of
their portion of the invoice package, completes the data on
the Voucher Transmittal using the data on the invoice and
the control listing. They also add the Voucher Number. This
Voucher Number will be the same one that was used in the pro-
cessing of the contractor's request for advance funds, except
that it will have a Roman numeral suffix. For example, the
voucher number cited above was 75-1818. The Voucher Number
used for the follow-up incoice would be 75-1818(11) signify-
ing the second use of that number. During the process of com-
pleting the Voucher Transmittal form the beginning and ending
dates of the invoice are carefully compared to the dates of
the period covered on the Routing and Transmittal Slip and
the SF 1034 prepared during the processing of the request for
advance funds.
59
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60
The established claim rate used to compute the contrac-
tor's administrative costs is also entered on the form. This
rate, determined by past experience and by contract provi-
sions, is normally a flat rate of a certain amount per claim.
Occasionally, when a contractor has a new contract or has
changed its processing procedures, a Provisional Claim Rate
is used. This rate is based on the number of claims expected
to be processed and the assets, people and equipment needed
to do the processing. At the end of the year this rate will
be audited by HEW auditors and, if indicated, appropriate
adjustments will be made in the rate. Five states have pro-
visions in their contracts that direct them to report actual
direct claims processing costs for the period covered. These
states are California, Washington, Connecticut, Wisconsin,
and Idaho. Why these five states are treated differently was
not explained by the OCHAMPUS officials. It was pointed out,
however, that the direct costs, when translated into a claim
rate, are quite comparable to the amounts paid to the other
fiscal administrators.
When the Voucher Transmittal has been filled out, it is
sent back to Data Processing. The invoice and the contractor's
Control Listing are retained by the F&A Division for later
use. In order to keep up with the workload the above steps
for each invoice package must be completed by 3:00 P.M. each
day. At this point it should be noted that the F&A Division
has only eight persons and must process an average of ten
61
advance payment requests and 20 invoice packages per working
day.
At the Computer Operations Division the completed original
Voucher Transmittal information is keypunched onto a card
which will be used as a "header" to the computer tape. Dur-
ing the night the header cards and the computer tapes are run
through the computer where the computer tapes are balanced
to the invoices, and at the same time, edited for errors.
Occasionally during a computer run, a tape is rejected. Re-
jections are typically encountered because the contractor has
modified his coding system and has not informed OCHAMPUS, or
the contractor's claims processing computer operations cycle
did not coincide with the financial cycle indicated on the
invoice. When the latter occurs, record count on the tape
will not match record count on the header card and, to save
processing time, the tape is rejected by the OCHAMPUS computer
The following morning the F&A Division receives a list
of processed and rejected voucher invoices. The processed
vouchers printout is shown in Exhibits 19 and 20. The
Control Listing is compared with the "Summary By Fiscal Year
and Branch" part of the Voucher Listing to ascertain correct-
ness of totals. The "Summary by Branch" part of the processed
Voucher Listing is used to calculate administrative costs
and will be discussed in a later section. Accompanying each
processed Voucher Listing is an "Edit Error List." Edit
errors are of two types. A "Hard" edit error, shown in
62
EXHIBIT 19
VOUCHER PRINTOUT
MC14P L02D 24/04/75 PAGE 1
IOWA STATE NO. 14
VOUCHER NUMBER 75-1818 SUMMARY BY FISCAL YEAR & BRANCH
FIS. YR. BR. SV. CLAIMS HOS . DAYS AMT . DUE GOVT
2122020 06-4075 P8400-2572 FIC 841214.12000.000 S05114
72 ARMY 2 39.50
TOTAL FY 72 2 39.50
*******************************
2132020 06-5075 P8400-2572 FIC 841214.12000.000 SO 5114
73 ARMY 5 149.25
TOTAL FY 73 5 149.25
*******************************
296.20
175.00
669.96
844.96
823.97
69.75
TOTAL FY 74 71 2,034.88
*******************************
9750100.6300 63-1303 P6300-2572 FIC 630000.12000.000 S05114
75 ARMY- 124 6,156.63
1,341.25
3,714.13
5,055.38
2,817.20
99.89
1,035.07
TOTAL FY 75 360 15,364.17
TOTAL STATE 438 17,587.80
EARLIEST DATE OF CARE 72 02
LATEST DATE OF CARE 75 0 3
2142020
06-8030 P8400-2572
74
ARMY 36
MARINE 1
NAVY 12
NAVY & MC 13
AIR FORCE 20
VET ADMIN 2
ARMY-
124
MARINE
17
NAVY
96
NAVY & MC
113
AIR FORCE
85
PHS
4
VET ADMIN
34
63
EXHIBIT 20
VOUCHER PRINTOUT
MC14P L03D 24/04/75 PAGE 2
IOWA STATE NO. 14
VOUCHER NUMBER 75-1818 SUMMARY BY BRANCH
FIS. YR. BR. SV. CLAIMS HOS . DAYS AMT . DUE GOVT.
9750100.6300 63-1303 P6300-2572 FIC 630000.12000.000 S05114
7.50 X ARMY 167 1,252.50
7.50 X NAVY & MC 126 945.00
7.50 X AIR FORCE 105 787.50
7.50 X PHS 4 30.00
7.50 X VET ADMIN 36 270.00
7.50 TOTAL STATE 438 3,285.00
COMBINED PROFESSIONAL & ADMIN COSTS FOR VOUCHER FY
ARMY 7,409.13
NAVY &MC 6,000.38
AIR FORCE 3,604.70
PHS 329.89
VET ADMIN 1,305.07
TOTAL ALL BRANCHES 18,649.17
64
Exhibits 21 and 22 as "Less Deduct Items" is an error which
materially affects a claim. The error in this sample occurs
in the line entry for the patient named Kalerg. Column T,
Amount Paid for Principle Procedure, is shown as $131. The
OCHAMPUS Edit Error Program automatically searches the files
for a determination of which figure is correct and calculates
the correct amount, in this case $64.80.
A "Soft" edit error, on the other hand, does not material-
ly affect the claim. Examples of soft errors are shown in
Exhibit 23. This sample soft edit error list is taken from a
physician's claims tape. The code "37 I" is defined as an in-
valid procedure code in Column R. Exhibit 24, the legend for
Physician's Records, is included to permit easier reading of
Exhibits 22 and 23.
All edit errors are returned to the contractor for correc-
tion via a standard form letter which explains the effect of
hard and soft errors and contains direction to the contractor
on procedures to follow in correcting and resubmitting the
error claims. This form letter is shown in Exhibit 25. It
should be noted that less than 10 percent of all claims that
are processed by OCHAMPUS result in an edit error list.
After the processed Voucher Listings have been compared
with the Control Listings, a voucher clerk prepares a CHAMPUS
Form 197, Contractor Reimbursement Worksheet. This form is
shown in Exhibit 26. The Voucher Number block may contain
more than one Voucher Number, but each number can be readily
65
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68
EXHIBIT 24
LEGEND FOR PHYSICIAN RECORDS
A - Patient's Last Name
B - First Initial
C - Second Initial
D - Age of Patient
E - Relationship
F - Basis of Care
G - Service Number
H - Grade or Rank
I - Branch of Service
J - Status
K - Certification
L - Zip Code
M - State Code
N - Location of Source of Care
0 - Patient Status
P - To Date (Month and Year)
Q - Diagnosis
R - Principal Procedure
S - Number of Outpatient Visits
T - Charges for Principal Procedure
U - Amount Paid for Principal Procedure
V - Total Amount Charged for All Services
W - Paid by or Due from Patient
X - Due from Government to Source of Care
Y - Due Patient or Sponsor Reimbursement
Z - Claim Number
69
EXHIBIT 25
DEPARTMENT OF DEFENSE
OFFICE FOR THE CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED SERVICES
DENVER, COLORADO 60240
CH. 19
RE: OCHAMFUS Voucher #
Dear
Inclosed is a machine listing of rejected and unrejected (hard and soft)
errors found by the application of the OCHAHFUS Editing Procedures as
outlined in the appropriate Appendix, as revised.
Rejected (hard) errors have been deleted from payment of your
Invoice No. as indicated:
STATE
PUTS
CLAIMS
DRUG HDCP
HITS
AMOUNTS
DRUG
HDCP
Please correct these rejected records and resubmit them on a future
invoice. Do not resubmit these records as adjustments, since a claim
rate has not been paid for these rejected claims.
Unrejected (soft) errors may also appear on the attached list. These
records h->ve not been rejected, but require correction. Please correct
these records and resubmit them on a future invoice as adjustments.
It is important that these soft errors be resubmitted as adjustments,
since a claim rate has already been paid on these unrejected claims.
Unrejected claims may include credit items. Credit items will never
delete as hard errors, since a credit deletion could result in a
voucher total greater than the invoiced amount.
Sincerely,
Incl.
Error Edit Listing
REBA B. RANSOM
Chief, Finance and Accounting Division
70
EXHIBIT 26
CONTRACTOR REIMBURSEMENT WORKSHEET - PROFESSIONAL COST LIQUIDATION 8. ADMINISTRATIVE COSTS
I. VOUCH ER NO.
2. MAKE PAYABLE TO:
Certified Invoice Attached
Certified Invoice Attached
Certified Invoice Attached
thru
( For Period :
For Payment to Civilian Sources for Health and
Medical Benefits ( Claims )
Certified Invoice Attached
Certified Invoice Attached
Certified Invoice Attached
-)
Claims at $
each
Less
Less
Less.
Less .
PPNo..
PPNo.
PPNo.
PPNo..
.(Vou No. .
.( Vou No..
.( Vou No.-
.( Vou No. .
) dtd
) dtd
) dtd
) dtd
2142020 06-6030 P840000-2572
( FIC 841214.12100.199 ) S05114 Army.
Amount Verified
«AMPUS/A°U«G"7I197
71
traced back to the original request for advancement of funds.
To explain further, refer to the Voucher Number 75-1818 on
previous exhibits and in the discussion above. When the SF
1034 was prepared for the advance funds, this number appeared
as 75-1818(1). On the Voucher Transmittal and on the Form
197 now being prepared the number appears as 75-1818(11). If
one assumes that the invoice contained the Hard Edit Error in
Exhibit 22, the same Voucher Number will appear on another
Form 197 as 75-1818(111) when the edit error is resubmitted
for payment. Another method of cross-reference on the Form
197 is the block labeled "PP#" in which the partial payment
number from the funds advanced voucher and the Routing and
Transmittal Slip is entered.
Within the main portion of the Form 197 the top three
entries titled "Certified Invoices Attached" are suffixed by
a letter - P, D, H, etc. - depending on whether the category
of claims is for Physicians, Drugs, Hospital, or so forth.
The dollar amounts of the claims are entered in the dollar
column. Deduct items from Hard Edit Errors are subtracted
from the claims costs to arrive at a net total of professional
costs.
The "Certified Invoices Attached" section in the middle
of the form is used to account for administrative costs as
computed on the Summary by Branch section of the Voucher
Listing shown in Exhibit 20, above. As in the professional
costs section of the form, deductions for Hard Edit Error
72
claims are made, that is, the claim rate times the number of
rejected claims is deducted from the total administrative
costs shown on the Summary by Branch.
C. ACCOUNTING PROCEDURES
After CHAMPUS Form 197 is completed, it is sent to an
accounting technician who verifies the figures against ledger
entries for the advancement of funds. This particular pro-
cedure is time consuming as the accounts are listed by Fiscal
Year, by Professional Cost categories, by Administrative Cost
categories, and by Direct and Indirect Cost categories for
each branch of service. These accounts are listed on an
accounting sheet which is approximately 4 8 inches long. All
entries on this spread sheet are made manually and all
columns must be totaled, balanced, and cross footed daily.
When the above procedures are completed, the information
is posted to a Miscellaneous Obligation Document, DA Form
3717. This form is shown in Exhibit 27. The date used on
this form is the next working day's date. The description
is a four digit internally generated code representing the
branch of service. The codes currently in use are:
ARMY - 6025 PHS - 6028
NAVY - 6026 VET ADMIN - 6029
AIR FORCE - 6027
Column 3 is the amount in the appropriation for the branch
of service, column 6 is the total disbursed for that day, and
column 7 is the unliquidated balance of the appropriation.
73
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74
The sum of the figures in columns 6 and 7 must equal the bal-
ance shown in column 3.
The process is completed when the above data is entered
into the computer from the appropriate Accounting Coding
Sheet, a form used primarily for the computer keypunch sec-
tion. At the end of each month all accounting reports gen-
erated by the computer are checked against the accounts in
the several ledgers and manually balanced against the FAMC
Disbursing Officer's Report. In case of differences the
Disbursing Officer's Report is considered the correct figure.
In order not to have to go back through the 4 00 plus vouchers
processed in an average month, the Disbursing Officer furn-
ishes OCHAMPUS with a daily Disbursing Officer's Report. An
additional check is made to make certain that the ledger
figures are what was actually fed into the OCHAMPUS computer.
The Finance and Accounting Division receives at the end
of each month all of the usual accounting reports, such as
the Trial Balance of Accounts, a Consolidated Allotment Re-
port, a Status of Funds Report, a Status of Reimbursements
Report, a Current Month's Disbursements Report, a Cumulative
Disbursements Reports, and a Report of Unliquidated Obliga-
tions. The Status of Reimbursements Report pertains to funds
owed to OCHAMPUS by the Public Health Service and the
Veterans Administration for which direct reimbursement authori'
ty was received from the Secretary of Defense at the time the
approved budget for OCHAMPUS was received. These funds are
75
billed to the respective agencies for the amount of profes-
sional claims costs and administrative costs on a monthly
basis. A Standard Form 1080, shown in Exhibit 28, is used
for these billings. Because there is the direct reimburse-
ment authority, the agencies are not required to issue a
Reimbursable Work Order or other similar document as is re-
quired in nearly all other reimbursable instances.
The Finance and Accounting Division also receives one
special report each month. This is the Finance and Account-
ing Distribution List. This report provides the professional
claims costs by category of claim, by administrative costs,
by direct and indirect Costs for each branch of service by
fiscal year and by state. Thus, they can cite, for example,
that the total costs for Fiscal Year 1974 for Physician's
claims and other costs that were incurred by Navy beneficiar-
ies in the State of Florida amounted to $1,111.23, or whatever
the true sum might be.
76
EXHIBIT 28
Standard Form 1080
Revlaed May 1970
2 Treasury FRM 2500
1080-108-03
VOUCHER FOR TRANSFERS
BETWEEN APPROPRIATIONS AND/OR FUNDS
Department, establishment, bureau, or office billing
Department, establishment, bureau, or office billed
VOUCHER NO.
SCHEDULE NO.
BILL NO.
PAID BY
ORDER NO.
DATE OF
DELIVERY
ARTICLES OR SERVICES
QUAN-
TITY
UNIT PRICE
COST
PER
AMOUNT
DOLLARS AND CENTS
TOTAL,
Remittance In payment hereof should be aent to
ACCOUNTING CLASSIFICATION —
Billing Office
Appropriation
Symbol and Subhead
Object
Class
Bureau Cont.
and Suballot.
No.
Auth.
Acctg.
Activity
T
V
p
e
Property
Acctg.
Activity
Cost Coda
Amount
CERTIFICATE OF OFFICE BILLED
I certify that the above articles were received and accepted or the service* performed as stated and should he charged to
the appropriation (s) and/or fund(s) as indicated below; or that the advance payment requested is approved and should be paid
as indicated*
(Authorized administrative or certifying officer)
(Date)
(Title)
ACCOUNTING CLASSIFICATION— Office Billed
Paid by Check No.
77
CONCLUSIONS
In the chapter on the OCHAMPUS organization we provided
a picture of the administrative process presently used to
manage the complex program. The description of claims pro-
cessing provides an idea of how program contractors, providers
and administrators interact with the beneficiaries and the
health care providers.
Considerable thought has been given to having OCHAMPUS
perform all of the claims processing actions presently accom-
plished by Blue Cross, Mutual of Omaha and the several Blue
Shield and State Medical Societies. On the surface this
suggestion seems feasible but further consideration indicates
it may be impracticable. If OCHAMPUS were to process all
claims, their present computer facilities would be woefully
inadequate. To expand their facilities would require several
million dollars. Another factor is the number of persons re-
quired to review all the claims. Regardless of how sophistica-
ted a computer setup is used, people are still needed to do
the manual phases of the processing. The several CHAMPUS
fiscal intermediaries process over 265,000 claims per month.
To do this approximately 670 persons are employed by these
contractors. Still another factor is the CHAMPUS requirement
of maintaining a personal history file. These files, even
when on computer tape, occupy a large amount of space. This
would mean that OCHAMPUS would have to expand its storage area,
which in time, would mean additional investment in equipment
78
and buildings as well as more people.
Other factors, such as maintenance of provider profiles
and claims activity and audit files, would take more space,
equipment and personnel. These files would probably not be
as comprehensive nor as accurate as the ones currently main-
tained by fiscal intermediaries. For example, Blue Shield
of California maintains a provider profile on every physician
in the State of California. This profile allows them to
accurately determine area "customary" fees. If OCHAMPUS
maintained such a profile system, it would be comprised of
only those providers who accepted CHAMPUS patients and thus
the area "customary" fees would be composed of a smaller
number of providers and would, most likely, be not as
accurate.
Other methods of cutting program costs are being studied
by several groups including the Surgeon Generals, the
Assistant Secretary of Defense and the Office of Management
and Budget. These studies are primarily concerned with the
better management of the program. It is our opinion, that
the program's management, at least at the OCHAMPUS level,
is good. The staff at OCHAMPUS is concerned about the costs
and is striving to find ways of reducing them. The introduc-
tion of the Word Processing System has reduced the number of
secretarial persons needed to prepare reports. They are in
the process of computerizing the Finance and Accounting
Division. This step will serve to reduce the contractor
79
invoice processing time. The Contract Administration Divi-
sion is constantly monitoring claims processing activities
of the contractors and working with them in an effort to
reduce the claims backlog. The Liaison Division is striving
to better educate the beneficiaries as to allowable benefits
of the program.
That this program is complex cannot be denied. It has
three management levels, i.e., ASD, OCHAMPUS , and fiscal
intermediaries that do not always know what each other's
needs are. The amount of paperwork necessary to "manage"
this program is, although considerable in bulk, not completely
unmanageable. It would seem that the CHAMPUS Program, as it
is presently structured, does little in allowing the bene-
ficiary a voice in its operation. It is true that the bene-
ficiary does have the freedom of choice to go to a military
or a civilian facility but once that choice is made, he has
no further voice in the program's operation. There is nothing
in the CHAMPUS Program that encourages the beneficiary to
shop around for the best available care at the lowest price.
This facet of the program's management could use more emphasis
80
REFERENCES
1. Deputy Secretary of Defense Memorandum, Subject:
CHAMPUS, 4 December 19 74.
2. Department of Defense, Office For Civilian Health and
Medical Program of the Uniformed Services, Organization
and Functions Manual, Denver, Colorado, 1 April 1974.
3. OCHAMPUS, CHAMPUS Program Manual, Denver, Colorado, no
date.
4. William W. Hall, Jr., Supervisor, CHAMPUS/CHAMPVA
Department, Blue Cross of Northern California, personal
letter, 13 March 1975.
5. J. J. Wrabetz, Assistant Vice President, CHAMPUS, Mutual
of Omaha Insurance Company, Omaha, Nebraska, personal
letter, 28 March 1975.
6. Mel Shiltz, Assistant Manager, CHAMPUS/CHAMPVA, Blue
Shield of California, interview conducted during visit
to Blue Shield offices, 8 February 1975.
7. Ms. Rheba Ransom, Chief, Finance and Accounting Division,
OCHAMPUS, Denver, Colorado, interview conducted during
visit to OCHAMPUS offices, 24-25 April 1975.
81
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